How to Explain Bankruptcy on an Application
Filing bankruptcy can be a difficult choice, since bankruptcy often carries long-term ramifications. In addition to the decline in your credit score, the fact that bankruptcy is a public record means that you may have to explain yourself on applications for jobs, loans or even apartments. People who see a bankruptcy in your records may be more lenient in their appraisal of you if you can offer a good explanation for why you had to file bankruptcy.
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Instructions
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Tell the truth. Regardless of why you had to file bankruptcy, if you lie about it you may just be creating more trouble for yourself down the road. For example, if you get a loan based on false information, you may face legal action in the future. Additionally, lenders and employers may be able to tell that you are lying, which could affect your chances of success with them.
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Focus on factors out of your control. If you filed bankruptcy simply because you were irresponsible with your credit, it may be a good thing for future creditors to deny you credit. However, if you were a victim of fraud, divorce, medical expenses or other factors beyond your control, creditors and employers may be more likely to give you the benefit of the doubt for your bankruptcy rather than judge you as a business risk.
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Don't go out of your way to offer information. While you don't want to hide the fact that you declared bankruptcy, if your creditor or employer doesn't seem to be interested, don't volunteer information that could cost you the loan or the job. If someone has an issue with the fact that you declared bankruptcy, they will usually ask you about it to give you the chance to explain yourself. If it appears to not be an issue, don't make it one by reinforcing the fact that you walked away from your debt.
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Emphasize your good behavior. When it comes to employment or getting new loans, usually the longer ago your bankruptcy occurred, the better. Point out to your interviewer that you have had months or years of good credit reports since the unfortunate even of your bankruptcy, and that you haven't been late on a single payment since. If you can convince someone that your bankruptcy was an isolated incident that happened in the past, they may be more likely to overlook the blemish on your record.
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