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:
- 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.
- 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.
- 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.
By 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)
It would ne nice to know how long NSLSC is supposed to take to write off student loans.
I was out of school more than 8 years in 2020, suffered a stroke. I made and successfully completed my consumer proposal in Sept 2021, and sent in all documents and cert of full performance over 2 months ago.
Still waiting to see a zero balance, and NSLSCmarked me with credit bureaus as having defaulted on payments, when I had received RAP and $0 payments till 2022.
Hello Eliza
My apologies on the late reply – I just received notification of your question. Were you able to resolve the issue? Had you been out of school for more than 7 years prior to filing your consumer proposal?
Regards
Kathy
As mentioned, I had been out of school for over *8* years when I had consumer proposal.
It took them to mid 2022 before they zero’d it out.
Then today I received a loan statement from NS Resolve, stating interest paid would not be counted towards ’22 taxes. That is of no consequence to me.
But what does irked is that they wrote I ‘defaulted – returned to Nova Scotia’ the remainder of my loan. The were recipients of over $675 in Dividends in the proposal. To me that isn’t a ‘default’. Am I wrong?
Hello Eliza
Creditors typically don’t write off the debt until the proposal has been completed and the Certificate of Full Performance has been issued. I was of the understanding that the creditor would note on your credit report that the debt was included in a consumer proposal. Technically you did default on the normal payments, but settled the debt within the proposal. You could try and contact the credit bureau and request the notation be updated with a copy of your proposal documents.
Regards
Kathy
hello, I am a student, currently, my situation is the followed, due to the pandemic, I cannot work for almost three years, I am a single mother with two small children, I decided to study to fix my situation and prepare myself through OSAP, I was able to start studying, but I signed for a proposal, They lied telling me that this would not affect my studies with OSAP. I am desperate because Im actually studying full time and they put me on a restriction. I no longer know what to do to be able to continue my studies and support my little ones. If OSAP does not remove the restriction, what can I do if I no longer have money and study full time
Hello Ys
It appears student loans have recently changed their position with respect to providing future funding in a proposal. I recommend you contact student loans or your school to see if they can provide you with any solutions to enable you to continue your studies. You may also want to contact your local ombudsman to see if they can advocate for you.
Best of luck
Regards
Kathy
Hello and thank you for your post, perhaps you could help me in my current situation. I ceased being a student less than 7 years prior to filling a consumer proposal back in 2017. National Student Loans was listed as one of my creditors but it was made clear to me that I would have outstanding debt with the NSLCS after my proposal was completed. I completed my proposal in October of 2021 at which point the insolvency company put about 400$ towards my student loans, and I have been making regular payments since the completion of my proposal. However I now have collections calling me telling me that my student loans have been sent to them. The insolvency company I went with has been 0 help on this matter, not responding to emails or offering me an explanation over the phone. I have been going back and forth between them and the NSLSC and no one can help me.
Hello Haley
Creditors are “stayed” from pursuing you for collection during the term of your proposal until the trustee is discharged. Once the trustee is discharged, the stay of proceedings is lifted and creditors whose debt survives the proposal are able to pursue for payment of their debt. The creditor then has the right to send the debt to collections. I recommend contacting student loans to see if you can deal directly with them for payment arrangements.
If they won’t agree, contact the collection agency to see if you can make payment arrangements with them and to make sure the payments you have made subsequent to the completion of the proposal have been properly allocated to your account. If you are still struggling financially, you could consult with a lawyer about making an application to court to have the debt discharged in your proposal pursuant to S178(1.1).
Good luck.
Kathy
Hello, I ceased being a student only in June 2020 but I only went back for a year most of my school stopped. 2017 and so I am in a bad financial spot I need to fill out a consumer proposal and I am hoping to get my student loan written off it’s 61k but I am not sure if they will even write it off or lower the payment a bunch because It’s only been a few years. Can you please advise
Hello Cassie
Unfortunately since you have not completed your studies more than 7 years ago, your student loans would remain payable after a consumer proposal unless they voted in favor of your proposal terms (which they are not likely to do). Depending on which province you are in, there is case law on the determination of completion of studies when you have returned to school. Additionally, there is a provision under the Bankruptcy and Insolvency Act that enables you to make a court application to have your student loans included in an insolvency 5 years after you completed your studies. It is quite complicated so I recommend you reach out to us directly to discuss at a free consultation.
Regards
Kathy
my credit has been good for almost 6 years and then BOOM a credit report for OSAP from 23 years ago lands back on my credit report.
It’s been so long that I can’t even remember if it was 2000 or 2001.
My payments with credit cards and card loans are in good standing.
Now this a complete nightmare because i don’t have 35000 .00 to pay back right now how can i take care of this please?
Hello Veronica
My apologies for the delay in replying. I would recommend that you schedule a free consultation with a Licensed Insolvency Trustee to discuss solutions. If you are in the locality of our offices, I would be happy to schedule an in person, virtual or telephone meeting.
Regards
Kathy