Can Student Loans Be Included in Consumer Proposals?

Understanding Student Loans and Consumer Proposals

The issue of student loans is a pressing concern for many individuals, who find themselves struggling to escape the cycle of debt. One possible solution to this problem is the inclusion of student loans in consumer proposals. However, the intricacies of this process, along with the specific rules that apply, can often be confusing. This article aims to shed light on the process, exploring the various aspects of the issue, and offering viable solutions for those grappling with student loan debt.

The Scope of Consumer Proposals in New Westminster, BC

Consumer proposals offer a ray of hope to many individuals burdened with student loans. In New Westminster, BC, for example, trustees at Bankruptcy Canada extend their services to individuals in need, providing consumer proposals and debt consolidation services. While student loans can often seem like a financial black hole, a consumer proposal might offer a way out. However, the application of consumer proposals to student loans comes with its own set of specialized regulations.

Unraveling The 7-Year Rule

The Bankruptcy & Insolvency Act lays down certain rules regarding the discharge of student loans in a consumer proposal or bankruptcy. According to Section 178 (1)(g) of the Act, a student loan can be wiped out in a consumer proposal if the individual has been out of school for at least seven years.

However, if this seven-year mark has not been reached, the loan may not be automatically discharged, irrespective of whether the creditors accept the proposal. In such a scenario, the creditors are eligible to receive a prorated share of the consumer proposal payments, but they can continue to demand the remaining amount post the proposal, unless they have specifically agreed to the loan’s discharge as part of the proposal terms.

Alternatives for Newer Student Loans

If your student loan is less than seven years old, you still have options. A consumer proposal could provide a solution, especially if you have significant debts like credit cards or unsecured bank debts. By eliminating these, a consumer proposal can make your student loan payments more manageable.

Another alternative is to request your student loan lender to fully discharge your student loans as part of your proposal. Though this might not always be accepted, it could prove attractive to lenders if you are approaching the seven-year mark. This is because, in the event of a bankruptcy filing, they might receive more through a proposal, making it a win-win situation.

Student Loans and Consumer Proposals: A Closer Look

Your student loans can be included in a consumer proposal or bankruptcy if you have been out of school for a minimum of seven years. Loans that don’t meet this requirement will survive the consumer proposal or bankruptcy process, necessitating further payment arrangements.

Various federal and provincial student loan Repayment Assistance Programs offer interest relief. Additionally, a court application can be made to discharge student loans if the individual has been out of school for five years, has acted in good faith, and continues to experience financial difficulties.

Debt Relief Solutions in BC

Bankruptcy Canada offers a range of debt consolidation and relief solutions, including personal bankruptcy, consumer proposals, credit counseling, insolvency, and student loan debt. Our team is a government-licensed insolvency and financial restructuring firm, providing student loan debt help.

The Reality of Student Loan Debt

On average, student loan debt in Canada exceeds $25,000, and this figure rises to over $40,000 for students supplementing their government loans with private funding. However, there are potential solutions to this problem. For instance, Canada Student Loan balances could be forgiven for certain professionals like family doctors and nurse practitioners. Borrowers can also file consumer proposals to prevent the government from seizing their pay or freezing their bank accounts.

Exploring Your Options

If you’re in over your head with student debt, it’s essential not to panic. While defaulting on your student loans might seem like an easy way out, it can have serious repercussions. One of the consequences of not making student loan payments for nine months is that they get sent to the Canada Revenue Agency for collection. The CRA can withhold your tax refund to apply it to your student debt. Furthermore, Canada Student Loans can negatively impact your credit score if you don’t make your payments.


The issue of student loans and their inclusion in consumer proposals is a complex one, fraught with legalities and specialized regulations. However, with the right information and guidance, it’s possible to navigate this labyrinth and find a solution that’s right for you. Remember, there’s no such thing as a silly question when it comes to your financial health. So, don’t hesitate to reach out to a professional for advice if you find yourself struggling with student loan debt.

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