If you're in a consumer proposal or bankruptcy and need a car loan, you've probably heard the term 'trustee permission'. It sounds intimidating, but it's a straightforward step designed to protect both you and the lender. Think of it as a green light from your financial guide, confirming that a new car payment won't derail your journey back to financial health.

What Exactly is Trustee Permission?

Trustee permission is simply a formal letter from your Licensed Insolvency Trustee (LIT). This letter confirms to a potential auto lender that your trustee is aware of the new loan and agrees that you can afford the payments without jeopardizing your consumer proposal or bankruptcy obligations.

It's not about judging your choice of vehicle; it's about responsible budgeting. The trustee's main job is to ensure your insolvency process is successful. By giving permission, they are essentially telling the lender, "Yes, I've reviewed their budget, and this new payment fits. They can manage this responsibility."

Why Do Lenders Ask For This Letter?

Lending to someone in an active insolvency comes with unique considerations. Lenders aren't trying to make your life difficult; they're just doing their due diligence. Here's why the letter is so important to them:

• Risk Assessment: It shows the lender that a financial professional (your trustee) has reviewed your situation and believes you have the capacity to take on new debt. This lowers the perceived risk.
• Confirmation of Affordability: It proves you've created a realistic budget that accommodates the car payment alongside your existing proposal or bankruptcy payments.
• A Sign of Good Faith: Getting permission demonstrates that you are being transparent and responsible about your finances, which is a huge plus for any lender.

Who Needs Trustee Permission?

This requirement is specifically for individuals who are currently making payments in a consumer proposal or an undischarged bankruptcy.

Once you have successfully completed your program and received your Certificate of Full Performance (for a proposal) or an Order of Absolute Discharge (for bankruptcy), you no longer need your trustee's permission. At that point, you just need to provide your discharge papers to the lender to prove you are free from those past obligations.

How to Get Permission from Your Trustee: A Simple 4-Step Process

Getting the letter is usually a smooth process if you prepare properly. You can't just call your trustee and ask for a blank cheque; you need to present them with a specific plan.

1. Get a Pre-Approval First: Before you talk to your trustee, you need to know the numbers. Work with a specialized auto finance provider to get pre-approved. This will give you a specific loan amount, interest rate, and estimated monthly payment to present.
2. Update Your Budget: Create a simple, clear monthly budget. It should list all your income and expenses, including your proposal/bankruptcy payment and the new estimated car payment. This is the most important piece of evidence you can provide.
3. Contact Your Trustee: Reach out to your LIT with the pre-approval details and your updated budget. Clearly explain why you need the vehicle-for example, to get to work, transport your kids, or for essential errands. Be honest and prepared.
4. Forward the Letter to Your Lender: If your trustee agrees that the payment is affordable, they will draft the permission letter. You then simply forward this document to your finance provider, and they can finalize your car loan.

What if My Trustee Says No?

Don't panic. If a trustee denies permission, it's almost always because the numbers don't work. They might feel the proposed payment is too high and would put you at risk of defaulting on your proposal, which helps no one.

If this happens, talk to them to understand their concerns. The solution is often to look for a more affordable vehicle with a lower monthly payment. Re-adjusting your budget or vehicle choice can often turn a 'no' into a 'yes'. It's a sign to take a step back and find a loan that truly fits your current financial reality.