How do you handle this situation: an applicant files bankruptcy some time in the past, part of the bankruptcy included a loan charged off by us. They have applied for a new loan and blatantly asked if they pay the charge off will we make the loan. Not sure how to respond, does anyone have guidance?

Of course paying a loan back is always a good consideration, would not necessarily change our decision for this loan either way. How do you respond without making it seem like paying it back is a condition for consideration?

If your policy is you will not make the loan because of the bankruptcy for x number of years - that is what you tell them. If you will not make the loan to someone that has a previously charged off loan with you, that is what you tell them. Those two things are not necessarily related.

The officer has some discretion, that is where we are struggling with the wording.

Discretion and Loan Officers can be (read IS!) dangerous. The Bank is the one making the decision, not the LO, and it should be based on POLICY. If they treat persons differently, they are setting themselves up for a DOJ visit.

e.g.
LO1 - says Yes, it's OK to a white customer
LO2 - says no we won't do that because of bankruptcy to a minority customer.

Tread very lightly. You can't ask a former bankrupt customer to repay debt. I realize from what you wrote that the bankrupt customer broached the repayment idea. But, by having a conversation about paying back the bankruptcy discharged debt as a possible condition of a new loan application you might be seen as violating bankruptcy provisions. I'd end the conversation and turn down the new request.