What happens to student loan debt in the event of a personal bankruptcy in Ontario or in Canada in general?
As the level of government funding for post-secondary
education has decreased, the level of student loan debt in Canada
has increased. Students graduate, but with the weak Canadian economy,
good jobs are hard to find, and it becomes difficult to repay Canada
Student Loans in a timely manner.
If a student with student loans files for bankruptcy in Canada,
the student loans are not automatically discharged unless the student
has been out of school for more than 7 years.
If you live in Ontario, and you have student loans that are more than 7 years old, bankruptcy may be an option. Please call one of our Ontario bankruptcy offices to arrange for a free consultation, or contact a bankruptcy trustee at Hoyes, Michalos & Associates Inc. by email and get answers to your bankruptcy questions.
If you live in Ontario and have less than 7 year old student loans, bankruptcy is only an option if you also have a significant amount of other debts, and want to clear your other debts so that you can continue to service your student loan debt.
If your student loan is less than 7 years old, you have three alternatives to bankruptcy.
First, you could contact student loans and attempt to make payment arrangements that are affordable given your current income.
Second, you could contact a licensed credit counsellor (listed in your yellow pages under Credit Counselling) to attempt to negotiate on your behalf.
Third, we could attempt to file a consumer proposal to deal with your debts. A consumer proposal for student loans has a greater likelihood of success if the student loan is at least two 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. In addition, it is important to note that there is no guarantee that the creditors will accept your proposal.
If you are experiencing problems with your student loan debt and you live in Ontario, please call one of our Ontario bankruptcy offices or email one of our bankruptcy trustees in Ontario today and arrange for a free of charge initial consultation. Professionals at Hoyes Michalos & Associates Inc. are happy to help.
We have prepared a summary of the current status of legislative amendments to student loans in bankruptcy legislation. For more information, please read our comments on changes to student loan bankruptcy laws or go to student-loan-bankruptcy.ca for more details.