Bankruptcy vs Consumer Proposal (Auto Lending Guide)

Which insolvency program damages your borrowing power more? The reality in the auto lending world might surprise you.

Both programs will absolutely ruin your ability to get a vehicle from a traditional bank for up to 7 years. However, in the subprime lending market that Always Approved operates in, we view both situations as temporary setbacks that can be financed.

The Consumer Proposal Approach

A consumer proposal legally dictates that you will pay back a portion of what you owe to your creditors over a maximum 5-year period. Your credit rating will reflect an R7.

Lender Perspective: Dealerships and lenders actually view consumer proposals very positively compared to the alternative. Why? Because you took responsibility for your debt and mathematically structured an affordable payment. Lenders know exactly what your monthly obligations are, and once we determine your remaining free cash flow, getting an auto loan approved during an active proposal is remarkably fast.

The Bankruptcy Approach

A bankruptcy wipes away all dischargeable debt, dropping your credit standing to an R9 immediately.

Lender Perspective: While bankruptcy sounds scarier, to an auto lender it means you suddenly have zero debt payments. Your DTI (Debt-to-Income) ratio is effectively perfect. While getting approved while undischarged is complex (requiring specialized network access), getting approved the moment you are discharged is almost mathematically guaranteed if your income holds steady.