Bankruptcy and Student Loans in Alberta

Examining Bankruptcy and Student Loans in Alberta

In the world of higher education, financial burdens often accompany the pursuit of knowledge. Student loans can become a heavy load, especially when financial hardship strikes. Understanding the implications of bankruptcy and student loans in Alberta can provide guidance and options for those finding themselves in such a predicament. This article will delve into the intricacies of managing defaulted loans, options for rehabilitation, the role of the Bankruptcy and Insolvency Act (Canada), and the impacts of filing for protection under this act.

Understanding Loan Default

Comprehending the consequences of loan default is vital when navigating the murky waters of bankruptcy and student loans in Alberta. Defaulting on student loans can negatively impact eligibility for future funding. If a borrower defaults on a loan, multiple methods may be employed to recover the debt, including:


  • Reporting to a credit agency
  • Employing a private collection agency
  • Initiating legal action

Utilizing the Canada Revenue Agency Refund Set-Off Program

Exploring Loan Rehabilitation

To regain eligibility for student loans and grants, a debtor must rehabilitate their defaulted loans. This process can involve bringing a delinquent loan up-to-date, paying all outstanding interest, and making the equivalent of two months of required payments. Exceptional situations, such as those involving legal action or disability, may alter the requirements and processes for loan rehabilitation.

Understanding the Bankruptcy and Insolvency Act (Canada)

The Bankruptcy and Insolvency Act (Canada) (BIA) is a critical piece of legislation in the context of bankruptcy and student loans in Alberta. The BIA outlines the implications of filing for protection on student loans and impacts a student loan borrower’s eligibility for further Alberta Student Aid funding. Filing for protection under the BIA may include:



Filing for Protection while in Studies

Borrowers who file for protection under the BIA while still studying can maintain interest-free status and continue receiving Alberta Student Aid funding for up to three consecutive years, provided the student does not take a break in studies of six months or longer. The eligibility for interest-free status and additional funding depends on multiple factors, including the end of the program of study, the end date of the study period during which the bankruptcy-related event occurred, and the date of filing.

Filing for Protection while in Repayment

Students who have filed for protection under the BIA during loan repayment may be approved for repayment assistance or interest-free status if their loans are in good standing. Borrowers should contact the National Student Loan Service Centre to discuss their eligibility for repayment assistance for their Canada Student Loans.

Receiving Additional Student Loans after Filing for Protection under the BIA

Different scenarios, such as the orderly payment of debts (OPD) and filing a bankruptcy or consumer proposal, affect the ability to receive additional Alberta Student Aid funding. Detailed documentation is required to prove that the borrower has satisfied the terms of the OPD, bankruptcy, or consumer proposal.

Addressing Student Loans and Consumer Proposals

Consumer proposals offer a viable option for debt relief after the initial seven-year waiting period. A consumer proposal consolidates student loan debt with all other unsecured debts, and the debtor agrees to repay a portion of what is owed. This approach could result in up to 80% debt forgiveness, and the new amount owing can be paid over time with manageable monthly payments.

Exploring Student Loans and Bankruptcy

Bankruptcy provides another route for discharging student loan debt after the seven-year waiting period. Depending on the debtor’s current situation, they can be discharged in as little as nine months. Bankruptcy also includes other unsecured debts, offering a fresh start for the debtor.

Post-Graduation: The Seven-Year Threshold

The period after graduating plays a significant role in the options available for student debt relief. If it has been more than seven years since the completion of studies, student loan debt can be discharged by filing for personal bankruptcy or large portions can be forgiven by filing a consumer proposal. If it has been less than seven years, the options are more limited, and it is unlikely that student loan debt can be included in a consumer proposal or bankruptcy filing.


Tackling the issue of bankruptcy and student loans in Alberta requires a comprehensive understanding of the options, requirements, and consequences associated with default, rehabilitation, and filing for protection under the BIA. By exploring these avenues, borrowers can equip themselves with the knowledge necessary to make informed decisions about their financial future.

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