40K in Student Loan Debt : A Student Debt Story in Canada
Student loan debt doesn’t discriminate.
Federal student loan debt is as high as $18 million, and the average person leaves college with arrears of $20,000 to $30,000.
If you think this won’t happen to you because you will do things’ properly,’ you could be mistaken.
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Student Debt Case Study
Steven is a Canadian like many others.
He got good grades at high school, used them to get into a top university, and finally landed a job as a teacher at a private school.
Unfortunately, none of this helped him to pay off his creditors and gain financial stability.
Although his student loan debt was higher than the average – 40K – it was manageable.
At least, it was on paper.
Soon, his $500 per month repayments started to cripple his bank account, even though his job was in the higher paying bracket (60K).
As the years passed, and he furloughed buying a home and saving for retirement, his debt didn’t go down – it rose.
After a while, as well as his $40,000 student loan debt, he accrued $40,000 of consumer debt, too.
As a result, his payments rose to more than $2,000 a month.
What Happened To Steven?
On the face of it, Steven had done everything he was supposed to do.
He entered the workforce and secured a stable salary which should have more than cleared his student loans.
So, what went wrong?
One of the main problems was consumer debt.
Unlike the government, the repayment schemes for banks or credit card companies aren’t flexible.
Miss a payment and the interest rate skyrockets, just like what happened to Steven.
Not from home, but his job.
He continued to work for the private school, yet he couldn’t afford to live in or around the affluent area due to his financial situation.
This amounted to paying $700 per month in the following:
- Car payments
They cost him valuable resources he could have used to chip away at his student loan debt.
He Didn’t Analyze Debt Vs Income Ratio
Debt Vs Income ratio is the amount of money a person earns compared to the debt they are expected to accrue.
In Steven’s case, the risk was high.
He borrowed 40K to receive a total of 60K, which isn’t a wise move.
Why? Well, the risk included in not getting a high-paying job is one reason.
However, it’s also the life decisions Steven had to put off for the sake of his debt.
He couldn’t afford to buy a home or get married, for instance.
Plus, there was the risk of adding to his debt as he tried to reduce his premiums.
What Should You Do If You’re In Steven’s Position?
There’s no point looking back and cursing the decisions you made when you were twenty-one.
Those days are over, and the only thing you can do is focus on the future.
With that in mind, you have two options worth considering – bankruptcy and a consumer proposal.
Bankruptcy Vs Consumer Proposal
So, which one do you choose?
Filing for bankruptcy, while it harms your credit rating, eliminates all unsecured debts.
You won’t be able to clear your student loans entirely, but the consumer debt will disappear, as long as there is no collateral attached.
Examples of unsecured debts are:
- Credit card loans
- Medical bills
- Utility bills
It’s worth noting that being declared bankrupt may not be the end of the matter.
Creditors can use alternative means of repayment, while your damaged credit rating will prevent you from getting a traditional loan again.
In Canada, if your debts are unsecured and total no more than $250,000, you can apply for a Consumer Proposal.
By doing this, you agree to repayment terms with debtors via a Licensed Insolvency Trustee (LIT).
Then, you pay the administrator, who in turn passes the money onto the people and businesses you owe.
This is a legally binding process under the Bankruptcy and Insolvency Act in Canada.
You will be subject to specific responsibilities, such as making all payments.
If you miss three, your consumer proposal will be canceled. Learn more about what you have to do here.
A Consumer Proposal also allows you to keep any assets you have, as opposed to bankruptcy claims.
How Likely Are You To Be Accepted?
Steven’s story is a harrowing one for many Canadians because it could easily happen to you.
Still, a consumer proposal doesn’t help if the chances of being accepted are slim to zero.
Thankfully, applications have a high acceptance rate.
This is because you only need a simple majority for the vote to pass and become binding.
Creditors must hold a vote within a timeframe of receiving your application.
It is classed as accepted should more than half of them agree.
Creditors who objected are bound to the terms and conditions of the proposal.
How Long Does It Take?
Steven is now 38.
It took him too long to ask for help and transform his finances.
You don’t have to follow his example.
At Bankruptcy Canada, we will craft a plan tailored to your needs as quickly as possible.
Once we submit it, you will hear back from your debtors within forty-five days.
Therefore, with our help, you can start to pay off crippling student loan debt in fewer than two months.
Regarding the length of the proposal, it will last for five years or sixty months as long as you stick to the Ts & Cs.
This is to give you hope that you will be debt-free one day.
Why Choose Us?
It’s because we regularly work with graduates who fall victim to student loan debt like Steven.
While going to college is a good way to propel yourself up the social and economic ladder, it’s not foolproof.
Students who make small errors can pay for them for the rest of their lives.
We want to make sure this never happens to you or anyone else, which is why we’ve helped more than 100,000 people erase their debts.
Information on Consumer Proposals
Consumer Proposals in Canada – An Alternative to Bankruptcy
What is a Consumer Proposal?
What are the Benefits of a Consumer Proposal?
What are the Steps in a Proposal?
What Debts Are Erased in a Consumer Proposal?
Is There Life After a Proposal?
Consumer Proposal Eligibility
How to Amend a Consumer Proposal
How to File for Bankruptcy
What is Bankruptcy?
How Does Bankruptcy Work?
What is the Cost of Bankruptcy in Canada?
How to Rebuild Credit Following Bankruptcy
Personal Bankruptcy in Canada
What Debts are Erased in Bankruptcy?