Financial challenges can appear in many forms and can sometimes lead to severe consequences, such as filing for a consumer proposal or bankruptcy. If you find yourself in such a circumstance and are a student or planning to become one, you might be wondering, can you get an OSAP loan while in a consumer proposal?
This article aims to provide a comprehensive answer to that question, guiding you through the intricacies of the Ontario Student Assistance Program (OSAP) and how a consumer proposal might affect your eligibility.
Understanding the Implications of a Consumer Proposal on Your Credit
When you file for a consumer proposal or bankruptcy, your credit score takes a significant hit. This decline in your credit rating can make it more challenging to secure loans as lenders might view you as a high-risk borrower. The same applies to the OSAP loan; having a consumer proposal on your record might complicate your application process.
Is an OSAP Loan Possible with Poor Credit?
Now, let’s directly address the question, “Can you get an OSAP loan while in a consumer proposal?” The answer is not straightforward; it depends on multiple factors.
If you’re 22 or older, the government will conduct a credit check. They will scrutinize your credit history to see if you have been delinquent for more than 90 days on three or more credit accounts with a combined value of $1000 or more over the past three years. If they find evidence of such delinquency, you may not be eligible for OSAP funding.
However, if your poor credit history is due to unforeseen financial hardships beyond your control, there’s a glimmer of hope. You can appeal to the OSAP Appeal Board, demonstrating your ability to repay your student loans in the future. If your appeal is successful, you might be able to secure an OSAP loan despite your tarnished credit score.
Applying for an OSAP Loan During a Consumer Proposal: The Process
There’s no rule that outright disallows you from applying for OSAP funding if you’re under a consumer proposal or bankruptcy. However, it’s crucial to disclose all the details of your proposal during your OSAP application. Your proposal’s details, including your discharge status, will be used in the application review process to determine your eligibility for financing.
While each case is unique, generally, you’re more likely to be approved for an OSAP loan if:
- It’s your first application.
- You don’t have any previous student loans or other government debts that are in default and included in your consumer proposal.
- You’re up-to-date with your consumer proposal payments.
Filling Out the OSAP Application Form
The first step towards securing an OSAP loan during a consumer proposal is to complete an OSAP application form. It’s imperative to fill out each section thoroughly, especially those relating to insolvency. Otherwise, your application might be rejected.
The OSAP application form has three questions related to consumer proposals on page 17:
- Question #610: Have you ever filed for bankruptcy or initiated a related event?
- Question #611: Is your bankruptcy discharged?
- Question #612: What is the date you filed for bankruptcy or initiated a related event?
The term “related event” refers to any insolvency proceeding under the Bankruptcy and Insolvency Act, including a consumer proposal.
Submitting Necessary Documentation
Depending on your answers to questions #610 and #611, you’ll need to provide specific documentation.
Suppose you answered “yes” to question #610 and “no” to question #611, indicating that you haven’t completed your consumer proposal. In this case, you’re required to provide a letter from your Licensed Insolvency Trustee that confirms the following:
- The Government of Canada and the Province of Ontario aren’t creditors for government-guaranteed student loans included in your proposal.
- OSAP’s funds won’t be distributed to your creditors.
- The filing date of your consumer proposal.
If you’ve completed your proposal (i.e., you answered “yes” to question #611), you must provide:
- A copy of your Certificate of Performance, or
- A copy of your consumer proposal search results from the Bankruptcy and Insolvency Records Search
Note: If you’ve negotiated student loans through an insolvency proceeding on or after May 11, 2004, you need to prove that there’s no outstanding balance. You may also need to provide additional documentation based on your particular circumstances.
Prior Student Loans and OSAP Eligibility
If you’ve previously received government-guaranteed student loans, you’ll need to meet one of the following conditions to qualify for further funding while under a consumer proposal:
- You’ve fully paid off your previous student loan debt. In this case, you need to provide proof of no outstanding balance. This proof could be a statement from the National Student Loans Service Centre (NSLSC) or a letter from your lender (Canada Student Loans or OSAP).
- You’re continuing your current study program. Here, you can provide a letter from your school confirming:
- Your enrollment in your program at the time of filing your consumer proposal
- Your current enrollment in the same program
- No study break longer than six months since your consumer proposal filing date
If you’ve cleared prior student loan debt through past bankruptcy or consumer proposal, you’ll only qualify for a new OSAP loan if at least three years have passed since your bankruptcy discharge or proposal completion.
Final Thoughts
While there’s no concrete guarantee, it’s possible to secure an OSAP loan after filing for a consumer proposal. The key is to be honest and transparent about your financial situation. Disclose all details of your consumer proposal and provide all required documentation.
If you’re considering a consumer proposal to manage your debts but have concerns about its impact on your student loan eligibility, consider consulting with Bankruptcy Canada. Our experienced Licensed Insolvency Trustees can assess your financial situation and advise if a consumer proposal is the best debt relief solution for you.
Remember, pursuing higher education should be a rewarding experience. If your debts are holding you back, don’t hesitate to reach out to us. They’re here to help you navigate your financial challenges, every step of the way!
