Car Loan During or After a Consumer Proposal

Q: On this page 8 sections

Do you need your trustee’s permission?Car loan during vs after a consumer proposalWhich lenders take consumer proposal files?What interest rate should you expect?What documents do lenders ask for?What happens to your existing car loan?How do you avoid a bad car deal?FAQ

Yes, you can get a car loan during a consumer proposal. The Bankruptcy and Insolvency Act (BIA) has no rule requiring your trustee’s approval first (consumer proposals are governed by ss. 66.11 to 66.4). Its credit-disclosure offence in s. 199(b) applies only to undischarged bankrupts.

The limit is the lender: you need one that accepts proposal files. You will pay a non-prime rate, which Loans Canada estimates at roughly 19% up to the 35% legal maximum for scores below 560 (estimates, updated July 10, 2026).

A consumer proposal is a legally binding deal, filed through a Licensed Insolvency Trustee, to repay part of your unsecured debt over no more than five years (BIA s. 66.12(5)). Canadians filed 110,168 of them in 2025, 78.4% of all consumer insolvencies (Office of the Superintendent of Bankruptcy, OSB). This guide covers the lender’s side in BC, Alberta and Ontario.

The short answer

No
The BIA has no rule requiring trustee approval for new credit during a consumer proposal; the $1,000 disclosure offence in s. 199 applies to undischarged bankrupts.
19% to 35%
Loans Canada’s estimated APR range for scores below 560, which is where a proposal usually puts you (estimates, July 10, 2026).
3 or 6 yrs
Equifax removes a proposal 3 years after it is paid off or 6 years after filing, whichever comes first.
3 missed
A monthly proposal is deemed annulled once you are behind by three payments (BIA s. 66.31), so a car payment must never crowd out the proposal payment.

On this page 8 sections

Do you need your trustee’s permission?
Car loan during vs after a consumer proposal
Which lenders take consumer proposal files?
What interest rate should you expect?
What documents do lenders ask for?
What happens to your existing car loan?
How do you avoid a bad car deal?
FAQ

Do you need your trustee’s permission?

No: Division II of the Bankruptcy and Insolvency Act (ss. 66.11 to 66.4), which governs consumer proposals, has no provision requiring a Licensed Insolvency Trustee’s approval before you borrow. Nor does it require you to tell a new lender about the proposal. We read the Act as current to September 21, 2026, on Justice Laws.

Some websites claim BIA s. 66.12 requires written trustee approval for new debt. It does not. Section 66.12 says who may make a consumer proposal, caps its term at five years (s. 66.12(5)) and sets the priority of fees (s. 66.12(6)). Your duties to start a proposal are in s. 66.13(1): get an administrator’s help and provide your financial information. Neither section mentions new credit.

The disclosure rule people mean is s. 199(b), and it applies to bankruptcy. An undischarged bankrupt who obtains credit totalling $1,000 or more without disclosing the bankruptcy commits an offence. The penalty is a fine of up to $5,000, up to a year in prison, or both.

One edge case: if you file a proposal while already bankrupt, you remain an undischarged bankrupt until the court approves it, because approval annuls the bankruptcy (s. 66.4(2)(d)).

New credit under the BIA: proposal versus bankruptcy
Question	Consumer proposal	Undischarged bankruptcy
Trustee approval needed to borrow?	Not required by the BIA (no such rule in ss. 66.11 to 66.4)	Not an approval rule, but disclosure is mandatory (s. 199)
Must you tell the lender?	No statutory duty; the proposal shows on your credit report anyway	Yes, for credit totalling $1,000 or more (s. 199(b))
Penalty for not telling	None in the BIA	Fine up to $5,000, up to 1 year in prison, or both
Biggest legal risk of a new loan	Falling 3 payments behind and the proposal being deemed annulled (s. 66.31)	Offence under s. 199 if undisclosed

Your trustee can still end up involved, though not as a legal gatekeeper:

The lender’s own rules. Canada Drives writes that “Some lenders will want confirmation from your LIT” that the new payment fits your approved budget (blog post dated June 26, 2026).
A release form. Prefera Finance’s Trustee Authorization Form, written for its recreational vehicle loans, lets your trustee release your payment history to the lender.
Your proposal’s own terms. The proposal binds you. We found no standard clause on new debt, but read yours.

Car loan during vs after a consumer proposal

Your car loan options change at three points: while the proposal is active, when you receive a certificate of full performance (BIA s. 66.38(1)), and when Equifax removes the proposal. Equifax removes it 3 years after completion or 6 years after filing, whichever comes first (Equifax; FCAC, July 1, 2026). The table below is our analysis of what changes at each stage.

NotchUp analysis: what changes for a car loan at each stage of a consumer proposal (built from the BIA, Equifax and FCAC, checked October 15, 2026)
Stage	When	What the law says	What a lender sees	Your move
During the proposal	From filing to the last payment, up to 5 years (s. 66.12(5))	No approval rule for new credit; 3 missed monthly payments deem the proposal annulled (s. 66.31(1)(a))	An active proposal on your report; the OSB says filers are “assigned the lowest possible credit score”	Borrow only if the payment fits beside the proposal payment; expect Loans Canada’s poor-credit estimate of 19% to 35% APR; keep the term short
Proposal completed	After the last payment and the required counselling	The administrator must issue a certificate of full performance (s. 66.38(1)); the annulment risk is gone	A completed proposal, still on your report, and a certificate proving it	Send the certificate to the credit bureaus (OSB advice); ask your lender about a lower rate or refinance, which ON, BC and AB allow without penalty
Equifax 3-year mark	3 years after completion, or 6 years after filing if that comes first	No BIA rule left to apply	Equifax removes the proposal; FCAC gives the same rule for TransUnion	Check both reports are clear, then shop rates on your file as it stands

Finishing early shortens the clock. A proposal filed in January 2026 and paid off in January 2028 drops off in January 2031. Run the full five years to January 2031 and the 6-year limit applies instead, so it drops off in January 2032 (our calculation, using Equifax’s rule).

Sources differ slightly on the clock. The Financial Consumer Agency of Canada (FCAC) gives Equifax’s rule for both Equifax and TransUnion, counting six years from when you sign (page dated July 1, 2026). The OSB’s comparison page lists Equifax at 3 years after completion with no six-year limit.

We could not load TransUnion’s own page, so we follow Equifax’s own page and FCAC. You can check both bureaus for free. See how to get your free credit report in Canada.

The certificate of full performance is the document that changes a lender’s view. The administrator must issue it once the proposal is fully performed (s. 66.38(1)), unless you refused the required counselling (s. 66.38(2)). It starts Equifax’s 3-year clock and removes the lender’s main worry about an active proposal: that a missed payment annuls it and revives your old debts (s. 66.32(2)).

Paying a proposal off early with a new loan is different. The OSB has warned that a payout “based solely on acquiring new debt can be problematic” because it can raise your total cost (January 11, 2023). Compare any such loan’s total interest with what you still owe under the proposal. Our guide to loans during a consumer proposal goes further.

Which lenders take consumer proposal files?

Few car lenders say anything public about proposals: only CarsFast names consumer proposals on a service page. Of the eight lenders and car-finance sites we checked on their own pages on October 15, 2026, five say nothing about proposals at all (NotchUp panel finding). Most proposal car loans go through dealers, who send your file to non-prime finance companies.

What lenders and marketplaces say about proposals and bankruptcy on their own sites (checked October 15, 2026)
Provider	Channel	Stated policy
CarsFast	Marketplace	Says its network “specializes in assisting people with all types of credit including consumer proposals”
Canada Drives	Dealer referral service	Stopped selling cars itself in 2023; you get pre-approved online and are referred to one of its partner dealers, which runs the credit inquiry. Its blog says lenders want proof your proposal payments are current, and some want your trustee’s confirmation
Prefera Finance	Dealer channel	Its Trustee Authorization Form, written for recreational vehicle financing, asks for the filing date, payments made and any missed payments; its site focuses on powersports and RVs, not car purchases
Santander Consumer	Dealer channel	For bankruptcy, applicants must be “fully discharged from any bankruptcy proceedings” or have met the trustee’s conditions while awaiting discharge; proposals not mentioned
iA Auto Finance	Dealer channel	Serves “near-prime to sub-prime credit markets”; no statement on proposals
EdenPark	Dealer channel	Says it qualifies applicants “even those with poor credit”; no statement on proposals
LendCare	Dealer channel	Markets non-prime auto financing to dealers; no statement on proposals
Rifco	Dealer channel	Describes “full spectrum non-prime lending”; no statement on proposals

Silence is not a refusal: dealer-channel lenders publish credit rules to dealers, not borrowers. The table below shows each provider’s published rates, terms and verification date.

Dealer-channel lenders and a marketplace relevant to proposal files, as published by each provider7 providers, rates as each one publishes them. Checked by hand against the provider’s own page; last check October 15, 2026.

Provider	APR as published	Term	Provinces	How to apply	Last verified
Santander Consumer BankThrough a dealer	Not published	Up to 96 months	BC, AB, ON	Choose a vehicle at a dealer that uses Santander; the dealer submits the applicationRequires minimum income of $1,800/month and finances vehicles up to 10 model years old and 180,000 km.	Oct 15, 2026
Prefera FinanceThrough a dealer	Up to 28.00%	Not published	BC, AB, ON	Through a participating dealer (Dealertrack / Compass Direct Portal)Mainly recreational and powersports financing; its 15-year terms apply to those loans, not cars.	Oct 15, 2026
CarsFastLoan marketplace	Not published	Not published	BC, AB, ON	One online application; matched with lenders and a network of about 350 dealershipsStates it assists 'all types of credit including consumer proposals'.	Oct 15, 2026
iA Auto FinanceThrough a dealer	From 8.99%	Not published	BC, AB, ON	Through a participating dealer; no direct consumer applicationRate Reducing Loan cuts the rate by 10% of the current rate every 12 months if all payments are on time and loan terms are met.	Oct 15, 2026
EdenParkThrough a dealer	Not published	Not published	BC, AB, ON	Through a participating dealerWholly owned subsidiary of Fairstone Financial Inc. (Fairstone Bank of Canada); reports payments to the credit bureaus.	Oct 15, 2026
LendCareThrough a dealer	Not published	Not published	BC, AB, ON	At the dealer's point of sale (dealer uses LendCare's FrontLine portal)Finances vehicles with no age restriction and up to 250,000 km; wholly owned subsidiary of goeasy Ltd.	Oct 15, 2026
Rifco National Auto FinanceThrough a dealer	From 12.90%	Not published	BC, AB, ON	Through a participating dealerDescribes itself as 'Full spectrum non-prime lending' for dealers across Canada.	Oct 15, 2026

“From” rates go to the strongest applicants; your rate depends on your credit, income, the vehicle and the term. No provider pays NotchUp for its position in this table, which is sorted by type of provider and then alphabetically. Rates are hidden once a row is more than 30 days past its check. Nothing above 35% APR, Canada’s criminal rate, is ever shown. How NotchUp makes money.

What interest rate should you expect?

Expect the poor-credit tier: Loans Canada estimates APRs for scores below 560 at roughly 19% up to the 35% legal maximum (estimates, updated July 10, 2026). That compares with about 12% to 19% for fair credit of 560 to 659. The OSB says a person who submits a consumer proposal is “assigned the lowest possible credit score”.

For comparison, the average rate chartered banks charged on auto loans advanced was 6.66% (July 2026, Bank of Canada). That covers banks only and all credit tiers, so it is a benchmark, not a proposal-era offer.

No lender may charge more than 35% APR, the criminal rate since January 1, 2025 (Criminal Code, s. 347). In Alberta, a lender charging 32% or more also needs a high-cost credit licence (Government of Alberta), and BC licenses lenders charging more than 32% (BPCPA, Part 6.3).

The rate tier moves the cost more than the car does. The rates below are illustrations inside Loans Canada’s estimated bands, not quotes.

Illustration: $15,000 financed for 60 months at four APRs (our calculation, monthly payments, no fees)
APR	Term	Monthly payment	Total interest	Total repaid
29.99%	60 months	$485.21	$14,113	$29,113
24.99%	60 months	$440.18	$11,411	$26,411
18.99%	60 months	$389.03	$8,342	$23,342
12.99%	60 months	$341.22	$5,473	$20,473

Illustration: a proposal-era used car loan at an APR inside Loans Canada's poor-credit estimate

Amount financed: $15,000
APR: 24.99%
Term: 60 months
Monthly payment: $440.18
Cost of borrowing: $11,410.80
Total repaid: $26,410.80

Assumes equal monthly payments, no fees outside the APR and no early repayment. Illustration only, not an offer.

Our car loan rates tracker follows the bank average and the non-prime panel month by month.

What documents do lenders ask for?

Lenders want two proofs: that your income covers the new payment, and that you have kept every proposal payment. Santander Consumer, a dealer-channel lender, states a minimum income of $1,800 a month (checked October 15, 2026). Prefera Finance’s Trustee Authorization Form shows the payment history a lender can ask your trustee to release.

That form, written for Prefera’s recreational vehicle loans, asks for:

the filing and completion dates
payments made
the monthly amount
any late, missed or NSF payments
which secured debts you pay outside the proposal

Bring this set to the dealer or lender:

Your filed consumer proposal and the notice that it was accepted or deemed accepted.
A trustee letter or payment history showing payments made and the balance left.
Your certificate of full performance, if the proposal is finished. The OSB tells you to keep all proposal documents for future lenders.
Proof of income: pay stubs or an employment letter, or tax returns and bank statements if self-employed.
Proof of address, a valid driver’s licence, and a void cheque or pre-authorized debit form.
Proof of insurance naming the lender, and a signed trustee release form if the lender uses one.

Self-employed? See car loans for self-employed borrowers for the tax documents lenders use.

What happens to your existing car loan?

Usually nothing changes, provided you keep paying it. A car loan is secured, and an approved proposal binds a secured creditor only if it filed a proof of claim (BIA s. 66.28(2)). The OSB says you keep your assets as long as you pay your secured creditors. Here is how it works, step by step:

The loan stays outside the proposal. The proposal binds all unsecured claims, but a secured claim only where the lender filed a proof of claim for it (s. 66.28(2)).
The lender cannot cancel because you filed. No one may terminate your agreement or demand accelerated payment only because you filed (s. 66.34(1)), though the lender need not advance more credit (s. 66.34(4)(b)). Leases get the same protection, and the lessor cannot terminate over rent owed before filing (s. 66.34(2)).
Falling behind still costs you the car. The stay of proceedings does not stop a secured creditor from enforcing its security unless a court orders otherwise, and then only for limited periods (s. 69.2(4)).
Equity can count. Hoyes Michalos, a trustee firm, writes that car value above your province’s exemption may be considered in what you offer creditors.
You can give back a car worth less than the loan. Hoyes Michalos writes that you must return it before the proposal begins, and any shortfall after the sale becomes an unsecured debt in your proposal.
Your province decides the shortfall. In BC, once a lender seizes or accepts surrender of consumer goods, your remaining obligations are extinguished (Personal Property Security Act, s. 67(2)). Alberta has a similar seize-or-sue rule when the seller financed the car, including a surrender the seller agrees to (Law of Property Act, s. 53). Ontario has no equivalent, so an Ontario lender can claim the gap.

FCAC warns that trading in a car with negative equity rolls the gap into a larger loan. Our down payment guide shows how it builds.

How do you avoid a bad car deal?

Protect the proposal payment first, because falling three monthly payments behind annuls the proposal (BIA s. 66.31(1)(a)). Then judge every offer by its APR, term and total cost: any APR above 35% has been a criminal rate since January 1, 2025 (Criminal Code s. 347). Never judge it by the monthly payment alone.

Budget the proposal payment first. Add the car payment, insurance and fuel to it, and walk away if the total does not fit.
Ask for the APR and term in writing. In Alberta (32% or more) and BC (above 32%), a high-cost offer must come from a licensed lender.
Know who earns from your rate. LendCare tells dealers it offers “some of the highest dealer reserves in the industry”. A dealer reserve is the dealer’s share of the interest, so ask whether your rate is the lender’s approved rate.
Keep the term short. FCAC counts 72 months or more as long-term and warns the total cost is higher. A long term on a used car is how people end up owing more than the car is worth.
Price add-ons separately. Warranties and protection products rolled into the loan add interest.
Be wary of “credit repair” pitches. The OSB has flagged “credit repair fees” and loans sold to debtors as ways to improve a credit rating.
Plan to refinance. Ontario (CPA 2002, s. 76(1)), BC (BPCPA, s. 74(2)) and Alberta (Consumer Protection Act, s. 68(2)) let you repay a consumer loan in full at any time without penalty. That means you can switch if a better rate is offered after completion.

If a payday loan helped push you into the proposal, see payday loans in a consumer proposal, and for filing trends, our insolvency statistics for 2026. The BIA is federal, but provincial repossession and licensing rules differ, and our car loans hub compares them.

Frequently asked questions

Can I get a car loan while I am still in a consumer proposal?

Yes, the Bankruptcy and Insolvency Act does not forbid it, but you need a lender that takes proposal files, usually reached through a dealer. Expect to show your proposal documents and on-time payments, and expect a poor-credit rate, which Loans Canada estimates at roughly 19% up to 35% APR (July 10, 2026).

Do I need my trustee’s approval to finance a car during a consumer proposal?

No, the BIA’s consumer proposal rules (ss. 66.11 to 66.4) contain no such requirement. Some lenders ask your trustee to confirm your payment history as part of their own approval. Canada Drives writes that some want your trustee’s confirmation that the payment fits your budget. Your proposal’s terms also bind you, so read them before you sign.

Do I have to tell a lender about my consumer proposal?

The BIA’s disclosure offence in s. 199 applies to undischarged bankrupts borrowing $1,000 or more, not to people in a consumer proposal. In practice the lender will see the proposal on your Equifax or TransUnion report, so be upfront and answer application questions truthfully.

How soon after a consumer proposal can I get a better car loan rate?

Options usually improve once you hold a certificate of full performance. They improve again when the proposal leaves your report 3 years after completion or 6 years after filing, whichever is first (Equifax). Ontario, BC and Alberta allow full prepayment of consumer loans without penalty, so you can refinance when a better offer comes.

Will a car dealer see my consumer proposal?

Yes, while it is on your credit report. Equifax keeps a consumer proposal for 3 years after you complete it or 6 years after you filed, whichever comes first. The Financial Consumer Agency of Canada gives the same rule for TransUnion. Any dealer or lender that pulls either report in that window will see it.

Can a new car payment cause my consumer proposal to fail?

Yes, indirectly: if the car payment leaves you short and you fall three monthly proposal payments behind, the proposal is deemed annulled (BIA s. 66.31(1)). Creditors can then pursue the full balance less what they received (s. 66.32(2)).