If you just filed Bankruptcy, you might immediately qualify for a car loan. In Canada, some applicants can qualify for a car loan the day after they file bankruptcy.
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.
