stressed student

When you initially borrowed from the Government of Canada to fund your education, you never anticipated that you wouldn’t be able to repay the loan.  The loan enabled you to obtain an education, anticipating that future employment in your career field of choice would provide an income to repay the debt.  Unfortunately, life changes and you may not have been able to complete your studies, suffered health issues or weren’t able to obtain employment in your career field.

You are now left burdened with a student loan debt that you can not pay in full but do not want to file a personal bankruptcy.  An alternative is to offer a consumer proposal to your creditors to compromise the debt.  Student loans are given special treatment in an insolvency filing and your “end of study date” will determine if the student loan can be compromised in a proposal as follows:

  1. If you ceased being a full or part-time student more than 7 years prior to filing a consumer proposal, your student loans will be included in a proposal that is accepted by the required majority of creditors.
  2. If you ceased being a full or part-time student less than 7 years prior to filing a consumer proposal, the student loan will remain payable at the completion of your proposal. A proof of claim filed by the lender will allow them to share in the dividends under your proposal which will reduce the balance owing, but they can continue to charge interest during the term of the proposal.  Student loans are not able to pursue you for payment during the proposal term.
  3. If you ceased being a full or part-time student less than 7 years prior to filing a consumer proposal and your proposal explicitly provides for the compromise of the student loan debt and student loans vote in favour of your consumer proposal which is accepted by the required majority of creditors, then the student loan debt will be compromised in your proposal.

It is very important for you to verify your “end of study date” with the government.  A return to school after your original student loan education complicates the calculation of your end of study date and should be discussed with a Trustee.  If you are considering filing a consumer proposal to deal with your student loan debt, contact Taylor Leibow Inc. for a free, initial assessment.

Kathy portraitBy Kathy Lenart – Insolvency Partner, Licensed Insolvency Trustee
CPA, CA, CIRP
Member and Secretary of the Ontario Association of Insolvency
and Restructuring Professionals (OAIRP)
Canadian Association of Insolvency and Restructuring Professionals (CAIRP)