Under the old rules, if you filed for bankruptcy in Canada, your student loan debt would only be automatically discharged if your student loans were more than 10 years old.
As of July 7, 2008, the rules changed, and now student loans are automatically discharged in a bankruptcy if they are more than 7 years old. We are still waiting for clarification to determine exactly how the new rules will be implemented. The most current information of these legislative updates can be found at student-loan-bankruptcy.ca.
Therefore, if you file for personal bankruptcy within 7 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.
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 7 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.