Effect Of Bankruptcy On Student Loan Funding

Bankruptcy is a legal procedure that allows individuals or businesses to seek relief from debts they cannot repay. However, how does it affect student loan funding? This article explores the impact of bankruptcy on student loan funding and offers alternative solutions.

Bankruptcy and Student Loans

The General Rule

Under normal circumstances, you can file for bankruptcy even if you have a student loan. However, if you anticipate additional funding from your student loans during your bankruptcy period, which typically lasts nine months, complications may arise.

Potential Issues

Student loan providers may hesitate to release further funds due to worries that these funds may be seized during the bankruptcy process. They may also withhold future loan disbursements until you are discharged from bankruptcy.

Alternatives to Bankruptcy

Consumer Proposal

If you’re in a tight financial spot, you might want to consider a Consumer Proposal as an alternative to bankruptcy. This is a legally binding process governed by the Bankruptcy and Insolvency Act. It allows you to negotiate with your creditors to reduce the amount you owe and extend the time to pay off your debts.

Advantages of Consumer Proposal

A significant advantage of opting for a Consumer Proposal over bankruptcy is that student loan providers may be more willing to continue loan advances during the Proposal period.


In conclusion, while bankruptcy can provide relief for overwhelming debt, its impact on student loan funding can create hurdles for those still in school. Therefore, alternatives such as Consumer Proposals may be a more suitable option for students in financial distress.

Find Your Personal Debt Relief Solution

Licensed Insolvency Trustees are here to help. Get a free assessment of your options.

Discuss options to get out of debt with a trained & licensed debt relief professional.