Student Loans & Bankruptcy
In Canada, government backed student loans get special treatment. It really depends on how long you have been out of school. Generally, if you have been out of school for more than seven years, the student loan debt will be eliminated if you do a bankruptcy or a consumer proposal. This is different than most other credit card debt and loans as they do not have the same 7 year rule. By booking a meeting with us, we can discuss your individual situation and help you determine if your student loan can be eliminated.
If you have been a student within the last seven years, your government guaranteed student loan will not automatically be discharged through a consumer proposal or bankruptcy. If you don’t know if your student loan is government guaranteed, or you aren’t sure if it can be eliminated, please reach out and we can assist with this.
Student Loans in a Consumer Proposal
A consumer proposal is essentially a deal you make with your creditors through a Licensed Insolvency Trustee. You can often settle on much less than you owe, and student loans can be included in this if they are older than seven years.
If the student loans are not older than 7 years, a person filing a consumer proposal still gets a ‘stay of proceedings’ which protects you from your creditors taking any action against you, but the loan is not eliminated with the proposal. The creditors will receive payments from the proposal and your debt owing on the loan will be decreased with every payment made to them out of the consumer proposal. Often times, people doing a consumer proposal continue making their student loan debt repayments throughout their proposal. With the reduction in their total debt obligation, this becomes manageable and we are available to discuss how this works if needed.
Other Items to Consider
If student loans are your only debt, or if they are just becoming unmanageable, you may also want to try the following options before calling a licensed insolvency trustee.
We would recommend first reaching out to your student loan office or provider and see if they would be willing to do any of the following:
- Ask for interest relief
- Ask for interest only payments for a period of time
- Apply for a hardship reduction. This often includes reduced interest amounts and possibly a reduction in the principal
- Negotiate other terms that will work for you
Finally Eliminating Student Loans
If you are an Albertan struggling to pay off your student loan, we can help look at alternatives and discuss some options to assist with this.
We are available for no-cost discussions in person or by telephone to review your situation with you and answer your questions on student loan debt.