Depending on credit history, bankruptcy information and the finance company, the loan process and credit requirements in bankruptcy can vary. If you’re currently in bankruptcy then you should review your financial situation with the trustee handling your file. You should only apply for credit in bankruptcy if you have the support of your trustee in bankruptcy.

Trustee in Bankruptcy (and finance)

If you have the endorsement of your trustee and you meet meet their minimum loan requirements, then your credit application has a much better chance of being approved. Once you apply for a car loan, the finance company may want to speak with your trustee in bankruptcy to confirm they approve of you incurring further debt.

By speaking with your trustee the bank can confirm if you’re making your bankruptcy payments on time and if your financial situation can accommodate a monthly car payment. If you are not paying your trustee on time or you cannot afford extra debt the finance company will likely decline your car loan.

Like many banks in Canada a sub prime finance company will usually verify your employment. A bad credit loan, like any loan, requires the applicant to have a job. The most common way to confirm someones job is to request a recent pay stub, tax assessment or bank statements. In bank language this is considered proof of income and it is a common part of the financing process in Canada.

Loan Affordability

When considering a car loan a bank must review all the risk factors, including current or previous bankruptcies. In every lending situation there are risks to the bank but when it comes to affordability, those risks get more complicated.

If you are active in a personal bankruptcy or consumer proposal then your monthly debt load might be significantly lower than it was before bankruptcy. By filing for bankruptcy you are decreasing your debt and, in theory, freeing up more income. If your monthly income and your new monthly debt can accommodate a car payment, then you could qualify for a car loan in bankruptcy.

If you want to get into a bankrupt car loan then you’re going to have to verify your employment situation. Read our article Proof of Income and Car Loans to find out how banks confirm your employment.