Can I be released of my Student Loans?
Is a Consumer Proposal possible with student loan debt?
Is filing personal bankruptcy possible with student loan debt?
How is the 7 year period calculated?
Can I be released of my Student Loans?
As per section 178(1) of the Bankruptcy and Insolvency Act,
Student loans received under the Canada Student Loans Act or similar provincial legislation cannot be automatically discharged by filing personal bankruptcy or making a consumer proposal unless the debtor has ceased being a full or part time student for a minimum of 7 years prior to filing.
Is a Consumer Proposal possible with student loan debt?
Provided that the debtor has ceased being a full or part-time student for more than 7 years as at the time of filing the consumer proposal, the student loan debts will be discharged upon completion.
If the debtor has not ceased being a full or part-time student for more than 7 years the student loan debts cannot be discharged by filing a consumer proposal. Even though the student loans cannot be discharged through the consumer proposal they are still subject to the stay of proceedings and able to receive dividend payments. Interest will continue to accrue during the term of the proposal and after the consumer proposal is completed the creditor will resume collection activity regarding any balance remaining unpaid. It is possible to maintain your regular student loan payments during the term of the consumer proposal to avoid additional interest charges.
Is filing personal bankruptcy possible with student loan debt?
The Office of the Superintendent of Bankruptcy Canada indicates that student loan debts can be discharged by filing personal bankruptcy provided that the bankrupt has ceased being a full or part-time student for more than 7 years as at the date of filing.
If the bankrupt has not ceased being a full or part time student for more than 7 years as at the date of filing personal bankruptcy the student loan debts are not automatically discharged.
If the student loan debts are not automatically discharged through the bankruptcy process the debtor may make an application to the court requesting that their student loans be included in their bankruptcy and be discharged. This is referred to as a “Section 178(1.1) application”.
The Section 178(1.1) application is not part of the service provided by the trustee. We recommend one of our knowledgeable and experienced partners.
How is the 7 year period calculated?
The 7 year period is calculated from your “last day of study” up until the date on which you file a consumer proposal or assignment in bankruptcy. The last day of study is not necessarily the last day that you attended classes. If you are unsure about when your official last day of study was you should contact the institute which you attended to confirm prior to filing.
