A rising question among students in Canada revolves around their financial security, especially in the face of bankruptcy. The primary query is this: Can I Get a Student Loan After Bankruptcy in Canada? To answer this question, it’s essential to delve into the intricacies of student loans, bankruptcy, and how they intersect within Canadian law.
Understanding Student Loans in Canada
The Burden of Debt
Many Canadians grapple with substantial financial burdens post-graduation from universities or colleges. The most formidable of these is often student loans. Coupled with other forms of unsecured consumer debt, like credit cards, these loans can pose a formidable challenge to individuals striving to establish their careers.
Student Loans and Bankruptcy
In certain circumstances, if your student loans are a significant part of your debt, you might consider bankruptcy or a consumer proposal as a course of action. However, there are specific waiting periods under federal law that you must adhere to. Failure to do so would mean your student loan debt survives the bankruptcy or consumer proposal.
Crucial Waiting Periods
The Seven-Year Rule
The timing of filing for personal bankruptcy or putting forth a consumer proposal depends primarily on two waiting periods. The first is a seven-year period from the date you cease attending school. If you file for personal bankruptcy or make a consumer proposal within seven years of ending your education, your student loan debt will not be discharged.
The Five-Year Rule
The second waiting period is five years from the day you stop attending school. This period is associated with a possible “court-ordered discharge” under a hardship provision in Canada’s Bankruptcy and Insolvency Act (BIA) if you don’t qualify for the seven-year rule.
Calculating the Waiting Period
Determining the start date of these waiting periods is vital. Many Canadians have found themselves unable to have their student loans forgiven because of a miscalculation in the start date. A Licensed Insolvency Trustee can assist you in calculating these dates correctly.
The Benefits of Adhering to the Seven-Year Rule
If you file for personal bankruptcy or make a consumer proposal more than seven years after your education ends, you are entitled to an automatic discharge of your outstanding student loan. However, if you do not meet the seven-year waiting period, your student loan debt will not be discharged.
The “Court-Ordered Discharge” and the Five-Year Rule
If you don’t meet the seven-year waiting period but satisfy the five-year one, you have the opportunity to seek a “court-ordered discharge” under the hardship provision in Canada’s BIA. This process requires you to demonstrate good faith and continued financial difficulty.
Understanding the Hardship Provision
The court will consider three factors when deciding whether to grant a “court-ordered discharge”:
- How the debtor used the student loan money
- The debtor’s efforts to repay the student loan
- The debtor’s attempts to complete the educational program
A Quick Overview of Consumer Rights Regarding Student Loans
Bankruptcy Post Seven Years of Education
If you file for personal bankruptcy more than seven years after ending your education, you are entitled to an automatic discharge of your outstanding student loan.
Consumer Proposal Post Seven Years of Education
If you make a consumer proposal seven years after your education ends, your outstanding student loan would be discharged once you fulfill your obligations under the proposal.
Bankruptcy Within Seven Years of Education
If you file for personal bankruptcy within seven years of ending your education, you are not entitled to an automatic discharge of your student loan debt.
Dealing with Student Loan Debts
A considerable number of Canadians struggle with student loan debts. As of 2020, the national student loan debt stood at $22 billion. This financial pressure often impacts mental health and is a significant reason why many young individuals opt out of higher education.
However, it’s crucial to understand that filing for bankruptcy or making a consumer proposal doesn’t mean the end of your academic journey. You can still apply for a student loan even if you’re bankrupt.
Conclusion
Understanding the complexities of Canadian insolvency laws can help you navigate through your student loan debt efficiently. Bankruptcy is a challenging situation, but it doesn’t necessarily have to spell doom for your education or your financial future. Always remember to consult with a Licensed Insolvency Trustee to ensure that you’re making the best decisions for your circumstances.
To answer the question, Can I Get a Student Loan After Bankruptcy in Canada? Yes, you can. However, the process requires careful planning, a firm understanding of the law, and the guidance of an expert in the field.
