A student loan has been granted to you to perfect your education and you are suddenly overwhelmed by debts? Bankruptcy obviously seems like a viable option, however do you know that this action will not eliminate all of your debt? If such an eventuality arises, what will happen with your student loan? Will this debt be part of your personal bankruptcy and will it be totally erased or will it still be repayable? Are there any assistance programs to help you pay your student loan?
First of all, let’s define personal bankruptcy: for a consumer who is unable to meet his financial obligations (insolvent), this is a legal mechanism that allows him to start anew by canceling their debts.
There are nevertheless alternatives to bankruptcy: the repayment assistance program and the consumer proposal.
IS THERE A REIMBURSEMENT PROGRAM AT YOUR STUDENT DEBT?
Assistance with the repayment of your student loan could be made (if eligible) if you are thinking about bankruptcy because of education-related debt.
The Quebec Student Financial Aid Office offers the Provincial Deferred Payment Program.
Debt cancellation for your student loan is planned using several options, perhaps a transitional cancellation or a reduction in monthly payments or deposits modeled on the state of your finances.
Can you pay off your student loan with a consumer proposal?
A consumer proposal only includes a student loan if your school career has ended for more than 7 years. Below this period, your repayments must not stop.
What are the non-dischargeable debts associated with personal bankruptcy?
Bankruptcy ensures the elimination of many debts, but not all of them. So-called non-repayable debts, as a rule allowance, penalties, payments or fines ordered by a court, remain excluded from bankruptcy. This does not exclude, however, that your student loan may be part of these non-repayable debts.
Why does the government not allow you to include a student loan in your bankruptcy?
This law can certainly create controversy, but the argument for it is very simple and implacable logic. The government does not allow the total write-off of your student loan through bankruptcy because it takes into account that your education is a large “gift” received. An easy release of this debt just would not be fair.
For example, if the loan was used to get you a home, the recovery of this money would be done by handing over the keys to your financial institution. In this case, the government can not get back any knowledge and diplomas received during your education.
Check if you have a student loan
It is essential to check whether you have been granted a student loan or not. A caisse, a bank or a financial institution grants you a student loan when the government guarantees it.
Sometimes, financial institutions make loans for education that are in fact a line of credit or a personal loan. In this case, you may include this claim in the consumer proposal or personal bankruptcy. You will only face a bank loan and not a student loan.
Bankruptcy and student loan: the famous rule of 7 years
The bankruptcy release avoids the constraint of repaying your student loan strictly if bankruptcy occurs 7 years or more after you leave school (part-time or full-time). Provincial or federal student loan legislation that granted you such a loan determines when you will stop studying on a part-time or full-time basis.
If the bankruptcy occurs seven years or more after the date that constitutes the termination of your actions as a full-time student or a part-time student, this debt will, like all your other debts, enjoy eligibility for the Liberation. The 7-year settlement concerns recent bankruptcies and bankruptcies where bankrupts did not yet benefit from their release on July 7, 2008.
If the court finds that repayment of the student loan causes unreasonable disturbances, it may decide to shorten the term to 5 years.
If you no longer pay your student loan: the consequences!
The government can take a number of measures if it deems you to be negligent in the repayment of your student loan, especially a number of years after graduation.
He has the option of keeping your solidarity tax credit and using it to pay your debt. He can also reserve the same fate for your (provincial) tax refund.
If this happens, it would be to your advantage to consult a trustee in bankruptcy or a financial advisor to determine what options remain viable for you.
Consult a bankruptcy specialist to determine if you will be able to include your student loan
You are at the end of the road and want to free yourself at all costs from your student loan to start breathing again?
Do not wait to reach the point of no return, do business with a trusted financial advisor or trustee in insolvency and avoid bankruptcy.
The “Ethan Frome.ca” network offers you the services of its bankruptcy experts to help you out of misery. They will advise you wisely on the steps to take to regain your financial stability.
All you have to do is complete the short form on this page to get a meeting!
Going bankrupt can be scary, especially if you have a student loan. Let our specialists, quality bankruptcy trustees, reach out to you. Together, you will find the solution to get you out of trouble.