Getting OSAP While Bankrupt or in a Consumer Proposal
Navigating finances while pursuing your education can be a challenge, more so if you have a history of insolvency, such as bankruptcy or a consumer proposal. If you find yourself in this predicament, you may be wondering, “Can I get OSAP while in bankruptcy or consumer proposal?” The simple answer is: it may be possible, but there are several factors at play.
In this article, we’ll explore the complexities of applying for Ontario Student Assistance Program (OSAP) funding following insolvency proceedings. Please note, this discussion is based on the specifics of the 2022-2023 OSAP application process, which may be subject to changes.
Applying for OSAP Post-Insolvency
Contrary to popular belief, insolvency doesn’t necessarily bar you from applying for OSAP funding. However, you will need to supply additional information during the application review process. If you fail to provide the required information, your application will be deemed incomplete.
Your overall situation and the completeness of your application will significantly influence the decision of the student loan program. From our experience, we’ve observed that:
- First-time applicants generally stand a higher chance of approval.
- Defaulting on existing student loans or failing to make payments can significantly impede the approval of new student loans.
Mandatory Insolvency Disclosure
The current OSAP application form explicitly asks applicants if they’ve ever filed for bankruptcy or initiated a related event. ‘Related events’ encompass proceedings filed under the Bankruptcy and Insolvency Act, including consumer proposals and personal bankruptcy.
If you answer affirmatively to having filed bankruptcy, you should also disclose if you’re an undischarged bankrupt and the date you filed. You’re considered an undischarged bankrupt until you fulfill all your bankruptcy responsibilities and get your certificate of discharge.
If you’ve filed a consumer proposal, you’ll need to disclose if the proposal is still active and the date you filed. The consumer proposal remains active until you fulfill the proposal and receive your certificate of full performance.
Canada Student Financial Assistance Act
The Regulations of the Canada Student Financial Assistance Act state that should a borrower with a government-guaranteed student loan file for bankruptcy or a proposal, they will not be eligible to receive a new student loan until three years after their discharge from bankruptcy.
The pertinent rule can be found in the Regulations, paragraph 16, subsection (2), part (d):
16 (2) (d) if the borrower is released from the borrower’s student loans and guaranteed student loans by reason that an absolute order of discharge is granted under the Bankruptcy and Insolvency Act, three years have passed since the date of the order.
The OSAP application contains three questions related to bankruptcy and consumer proposals. Your responses to these questions can significantly affect your eligibility for an OSAP loan. The Regulations of the Canada Student Financial Assistance Act, specifically paragraph 16, form the legal basis for these questions.
Discharge Status & OSAP Eligibility
Your discharge status plays a crucial role in the OSAP application process. Different documentation and conditions must be met based on whether you’ve completed your bankruptcy or proposal or whether you’re an undischarged bankrupt (or have not completed your proposal).
If you’re not yet discharged from bankruptcy (or have yet to complete your proposal), you’ll need to provide a letter from your trustee that confirms the filing date and states that the government, as a creditor for government-guaranteed student debt, won’t seize any funds provided by OSAP to repay creditors listed in your bankruptcy or proposal.
If you’ve completed your proceedings and received your discharge or certificate of completion, you must:
- Provide a copy of your certificate of discharge or certificate of full performance (consumer proposal).
- If your student debt was discharged as part of your bankruptcy or proposal under Section 178 (1) of the Bankruptcy and Insolvency Act, you must provide proof of when you were discharged and that three years have passed since the date of your discharge.
In essence, if you’re currently in a proposal or bankruptcy, you must demonstrate that you don’t have current student debt included in your bankruptcy or proposal and that your trustee won’t count new loans as income for the benefit of your creditors.
If you’ve already completed your bankruptcy or proposal and student debt was forgiven, proof that you finished your proceeding more than 3 years ago is required.
The application also clarifies that if you’ve previously negotiated student loans since May 11, 2014, you must provide proof that you no longer have outstanding balances on these negotiated loans.
To conclude, while bankruptcy or a consumer proposal doesn’t necessarily prevent you from applying for OSAP, it’s crucial to fully disclose all relevant information. If you’re considering going back to school and have not yet filed, it’s wise to speak to a trustee about your situation. If you’re grappling with other debts, dealing with that debt through a consumer proposal can improve your personal budget, making it easier to return to school.
