If you want to get financing immediately after filing bankruptcy, it will depend on a number of factors, including:

First Bankruptcy (Is this your first bankruptcy?)

Bankruptcy lenders in Canada might consider you after multiple bankruptcies however it’s unlikely, especially if you’re not discharged from your second bankruptcy.

If you are in your first bankruptcy you have a better chance of getting financing.

Type of Bankruptcy (Is this a personal bankruptcy or a consumer proposal?)

What type of bankruptcy did you file? If it is personal bankruptcy then you might qualify for a car loan right away. If you just filed a consumer proposal in Canada, then you might need to wait before getting more credit.

Why is a consumer proposal different? Canadian consumer proposals last longer than bankruptcy and have larger monthly payments. That translates to a greater chance that the person in proposal will either default on their insolvency or file personal bankruptcy.

While it doesn’t happen all the time but there are many circumstances where a person in consumer proposal will file bankruptcy, fail consumer proposal or just cancel it.

If a car loan is issued during consumer proposal and the debtor chooses to file bankruptcy, the lender is at a great risk of losing a lot of money. By waiting a longer period of time after the proposal is filed and waiting for some payments to made, the lender can feel more secure about approving the loan.

Employment situation (Are you employed and for how long?)

If you have a full time job and you can afford both your bankruptcy and a car payment, then you are on your way. Next step is proof of income. Almost all banks and especially special finance lenders require proof of employment. Reviewing your Total Debt Service Ratio is a regular part of the finance process in Canada.

If you have a qualifying job type (full time work and you’re not paid in cash) and you didn’t just start your job, then you might qualify for a car loan in bankruptcy.

Size of Bankruptcy (Was it a small bankruptcy or a large bankruptcy?)

What size is your bankruptcy? Did you file only after amassing a large debt or were you struggling with only a little debt? While no one likes bankruptcy a bank or finance company will always prefer a large bankruptcy. Why? Because a small bankruptcy means you couldn’t manage a small amount of debt, which makes you considerably riskier.

The best way to explain is with a question: If you filed bankruptcy for only $10,000 then why would a bank want to give you $15,000?

In Canada you can file bankruptcy one day and apply for a car loan the next, but like many high risk financial situations getting approved can be a challenge. If you’re in your first decent sized bankruptcy, you’re employed full time, you can afford both your payments to the trustee and a car loan, you have a much better chance of getting approved in bankruptcy.

Once they have full disclosure of your debts banks, mortgage brokers and auto finance companies use a special formula to determine affordability. The end result is called the Total Debt Service Ratio, which is commonly known as TDSR and TDS.

Total Debt Service Ratio is calculated by dividing an individual’s total monthly expenses into their gross monthly income. The resulting percentage is the Total Debt Service Ratio.

The higher the TDS the less likely the applicant can afford the loan. If the Total Debt Service Ratio is too high then the applicant’s ability to afford a car loan will be considered too weak and the car loan will be rejected.

If you think adding a car loan to your monthly debt will be too much, then your TDS could be too high and you might need to consider finding co-signor before you apply for credit.

There are many finance companies in Canada that specialize in bad credit loans and after bankruptcy auto loans. If you’re ready to borrow after bankruptcy, a car loan might be the right step but remember, being responsible is a major part of rebuilding credit after bankruptcy – please make your decisions based on what will help you and not just what you want.

Reading TDSR and Car Loans is a great way to learn more about Debt Service Ratio and auto financing in Canada.

This is how banks verify income in Canada:

• Pay Stub Verification – The finance company will often ask the loan applicant to supply a pay stub from their job. A pay stub shows the bank how much you are being paid, how often and by what company.
• Bank Account Statements – Sometimes a bank will ask the person applying for a car loan to show their monthly bank activity. By asking for your bank statements they can see how much income you deposit each month and how much you withdraw. Most banks will total your monthly deposits and consider that your monthly income.
• Employer Phone Calls – In many situations, especially when it comes to subprime loans in Canada, finance companies will make a phone call to your employer to confirm you have a job. Don’t take it personally, its actually quite common.
• Tax Assessment – Canadian residents receive annual T4 forms, Notice of Assessment or other tax documents to prove their annual income. Depending on how much income you claim or what type of job you have, the bank might ask for your tax information to verify employment.

The above methods for confirming employment outlined by Bankrupt Car Loans Canada are just some of the many ways auto lenders confirm employment. Depending on the type of job or how you are paid the bank may request additional proof of income.

The best way to guarantee your job is verified and your monthly income is approved is to never lie on your credit application and always be honest about your salary or wage.

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.

When someone files bankruptcy they are alerting their creditors and their future creditors of their insolvency and, therefore, riskier financial status.

Insolvency indicates an inability to pay creditor obligations and usually caps off a bad credit history. Because banks and finance companies approve loans based on credit history and credit scores in Canada, a bankruptcy will always have a major impact on their decision.

While a loan application might be approved with the applicant in bankruptcy, the loan is still a significant risk to the creditor. So in order to reduce risk and cut down on loses banks increase interest rates.

The increased interest rate paid in bankruptcy offsets risk, which ultimately allows lenders in Canada to finance bad credit loans and loans in bankruptcy.

A more complex process means there are many differences when bankruptcy is involved. The most significant differences between a regular loan and a bankruptcy loan are the interest rate and the application process.

Interest Rate

Interest rates for a car loan in bankruptcy can vary from near prime to sub prime rates. Whenever a bank has a potential customer with bad credit or a bankruptcy, they will either outright deny them credit or only consider them at a higher interest rate.

There are many variables involved in determining interest rate and an active bankruptcy only adds to them. For more information on bankruptcy and loan rates read Interest Rates in Bankruptcy.

Application Process

Personal bankruptcy is a serious situation that involves many steps. While financing a car in bankruptcy might not be as complicated as filing bankruptcy, it is still a very involved process.

Here are just some of the extra steps involved when borrowing money in bankruptcy:

• Employment verification
• Reference check
• Bankruptcy verification
• Trustee in bankruptcy meetings
• Confirmation of home address
• Payout of existing loans
• GPS device installation

The procedures involved in applying for a bankruptcy car loan may vary from the list above. Sometimes the loan process is less invasive and other times it involves more information and more time.

Please read Bankruptcy Loan Application Process for a more detailed look at the process.

Rebuilding Credit in Canada

If you’re a Canadian with a bad credit score or you’re in bankruptcy then your credit is damaged.

Before you can repair your credit score, lower your interest rates or get out of debt, you need to rebuild your credit.

Finance a Car Loan to Rebuild

Once you’ve put a stop to the issues causing your credit problems, it’s time to repair your credit. Believe it or not, getting a car loan can help repair your credit.

In Canada if you finance a car while bankrupt or you get an after bankruptcy auto loan and you make your payments on time, you are taking a big step towards rebuilding your credit.

Prove Yourself

Financing a car loan after bankruptcy is one of the best ways to show banks and finance companies that your bankruptcy worked. Each, on time, payment you make proves, on your credit file, that you can handle credit responsibility again. The major credit bureaus in Canada, after receiving word from your creditors, will then begin reporting your positive credit history.

The Right Decisions

If you make the right decisions when applying for a loan after bankruptcy, you’ll be able to afford your new car payment and after enough time, qualify for prime credit and a low interest rate on your next car loan.

A high credit score, low interest rate and a second chance at credit are all benefits to successfully paying for a bankruptcy car loan.

Even though a car loan can rebuild your credit history, you should only finance a vehicle if you need to.

Rebuilding damaged credit and re-establishing post bankruptcy credit are good reasons to get a car loan but they should never be the only reason!

The most important lesson you will learn at Bankrupt Car Loans Canada is to make your own financial decisions. If someone tries to tell you that you must finance a car loan after bankruptcy, then they are wrong.

Just like any personal decision, when you apply for a car loan no one can or should ever tell you what to do.

Should I Get a Car Loan?

Getting a car loan in Canada is a big decision, especially if you want to get a car loan while in bankruptcy.

Like any major financial decision you should first consider a few things:

• Do you need a car loan?
• Do you need a car loan or do you want a car loan?
• Is your bankruptcy being paid on time?
• Are you discharged from bankruptcy?
• Can you afford a regular car payment?
• Will a new loan affect your bankruptcy payments?

If you do need a car loan, you can afford a car payment while in bankruptcy and you’re sure a car loan won’t affect your trustee payment, you could be ready for car loan.

Bankrupt Car Loans Canada just got a makeover. 2010 is going to be a big year for the Canadian economy and Bankrupt Car Loans, so we thought we would dress the part.

Here are just some of the changes to our website:

• New layout
• Fancy colours
• Easier navigation
• Bankruptcy news is now labelled as a blog (after all, everyone loves a blog)
• New content

Expect a lot more content to come your way and don’t forget to follow us on Twitter!

Bankrupt Car Loans is proud to introduce a new quick, secure way for Canadians to check their credit score online – Check Your Credit First.

The same team of Canadian credit experts that brought you Any Bad Credit Canada and Bankrupt Car Loans just launched Check Your Credit First.

While knowing your credit score is an import part of maintaining healthy credit, knowing how to read your Canadian credit report is even more important. Check Your Credit First Canada offers a full credit report plus score service and a credit education center.

Their deep knowledge of consumer credit, credit scoring and financing is offered free to help you understand your credit score and learn how to read your credit report.

Bankruptcy reports to the credit bureau like many loans do, if you’re bankrupt in Canada or you have a past bankruptcy you can benefit from reading your credit report. By reviewing your credit file you can confirm and correct many important financial details. For bankrupts those small financial details matter even more.

Here are just a few of the many reasons you should check your credit report in bankruptcy:

• Make sure your bankruptcy is reporting properly and there are no mistakes
• You can confirm your bankruptcy liabilities and assets are reporting for the correct amount
• Checking your credit report can help you better understand how bankruptcy and consumer proposal works
• If you’re finished bankruptcy you should ensure your discharge from bankruptcy is reporting to both Canadian credit bureaus
• Double check your bankruptcy was filed properly and filed only once

Visit Check Your Credit First and you can get full access to your Canadian credit report in just minutes.