Paying Student Loans During Your Bankruptcy or Consumer Proposal
Some people have extraordinary large student loans and often time fidn it very hard to pay off, even over a long period of time. As you get older it seems like more and more debt is inevitable, and if you haven't delat with debts from the past (student loans for example) it's very easy to get into financial trouble.
The good news is, if you file bankruptcy and you finished school more than 7 years ago, you will not have to continue paying your student loan because it becomes a dischargeable debt in bankruptcy. You can also avoid bankruptcy and settle your student loan through a consumer proposal.
However, if you have been out of school for less than 7 years, student loan debt will not be automatically discharged by a bankruptcy or settled by a consumer proposal and you will remain responsible for the repayment of the debt.
Even though your student loan debt may not be included in your bankruptcy or consumer proposal, there is a still a stay of proceedings in place. This basically puts a freeze on any debt collection or payments until the bankruptcy has been discharged or the consumer proposal has been completed. With that said, if your budget allows, we recommend that you continue with payments to avoid accumulating additional interest. Your student loan provider may ask for a letter from your trustee consenting to the continuation of payments during the bankruptcy or consumer proposal period.
If you are considering filing a personal bankruptcy or consumer proposal you can contact the Canada Student Loans Service Centre to have them confirm your “end of study date” to make sure that it has been at least 7 years since you finished your studies.
If you have any questions regarding your student loan debt, or any other debt, book a free, no-obligation consultation with one of our licensed insolvency trustees today!