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Many of the people I meet with in Missisauga or Brampton have student loan debt. This type of debt along with other debts can sometimes be hard to manage and many want to know what options they have available to them.
The first question I am asked; Is what will happen to my student loans and what are my options?
Student loans are a special type of debt. It is an obligation that you have to pay like your credit card debt, so you are required to include the debt with your other debts in a bankruptcy.
Presently, however the law is that student loans are not automatically discharged like other debts, unless the student has been out of school for more than 10 years that is, ceased to be a fulltime student or graduated. Thus, when your bankruptcy is completed your student loans, if less than 10 years old since you graduated or ceased to be a full time student, will be a debt that you are responsible for paying and student loans can contact you with respect to payments.
If you are uncertain of when you ceased being a student and wish to determine your end of study date then you may want to contact student loans to verify this information.
Alternatives to bankruptcy, if your student loans are less than 10 years old are, as follows:
- Contact student loans and begin discussions about payment arrangements that are affordable given your present income. Also enquire if you are eligible for interest relief.
- You can also contact a credit counselor to begin negotiations on your behalf
- You may want to consider filing a consumer proposal to deal with both your student loan debt and other debts. A proposal usually requires you to have an income that will support payment terms that you wish to make with your creditors. Also it is usually best if your student loans are at least 5 years old since you graduated or ceased to be a student.
In November of 2005, the law was changed with the approval of Bill C-55, which included an amendment to reduce the period from 10 years to seven years for student loans. In other words, if you ceased to be a student for seven years when you file for bankruptcy, your student loans will be discharged. Less then 7 years and the debt will survive your bankruptcy.
There was also additional amendments that included an ability for a bankrupt to apply to court if their student loans are more than 5 years old, and request the court discharge the debt if the bankrupt has acted in good faith with respect to student loans and will continue to experience financial difficulty, such that they will be unable to pay the debt.
Although the Bill was passed into law, the law is not in effect. It was hoped that when the new government was formed, after the elections, that the law would be put into effect in the spring or summer of 2006, but that has not been the case. We are uncertain at this time when it might happen.
Thus if your student loans are less than 10 years old you may want to consider one of the above alternatives. If none of the alternatives will work for you then bankruptcy maybe something you want to consider.
If you are experiencing difficulty with student loans and or other debts we would like to assist you. Please contact our office at 310-PLAN and would be pleased to assist you.
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