At the present time, if you file for bankruptcy in Canada, your student loan debt is only automatically discharged if your student loans are more than 10 years old.
Therefore, if you file for personal bankruptcy within 10 years of leaving school, your student loan debt is not discharged when you go bankrupt, and once your bankruptcy is completed, you will remain responsible for repaying your student loans.
In November, 2003 the Senate Committee on Banking, Trade and Commerce released a report called Debtors and Creditors: Sharing the Burden: A Review of the Bankruptcy and Insolvency Act.
The Senate Committee recommended that the 10 year period be reduced to 5 years. However, for this change to become law, the legislation must be amended by the House of Commons. On June 3, 2005 new legislation was introduced (see our comments here), proposing a 7 year rule. This legislation has not yet passed, and it is unknown whether or not these proposed changes will pass.
The most current information of these legislative updates can be found at student-loan-bankruptcy.ca.
If you are able to continue servicing your student loan debt, continuing to make payments may be your best option. If the rules do change, a bankruptcy may then be an option.
Alternatively, we could attempt to file a consumer proposal to deal with your debts. A consumer proposal for student loans have a greater likelihood of success if the student loan debt is at least five years old, and the proposal term is five years long (so that at the end of the proposal the student loan is over 10 years old). To file a proposal, you must be working, or have a steady source of income.
If you are experiencing problems with your student loan debt and you live in Ontario, please call one of our Ontario bankruptcy offices or contact a bankruptcy trustee at Hoyes Michalos & Associates Inc. by email today to arrange for a no-charge consultation.