Understanding Student Loans in Ontario and Bankruptcy: An In-depth Guide
There are several queries that come to mind when considering the connection between student loans, bankruptcy, and OSAP. In the following article, we will address these questions to provide a comprehensive understanding of the topic.
1. Accessing OSAP After Bankruptcy
If you’ve found yourself in a situation where you’ve gone bankrupt, you might wonder, “Can I still access OSAP?” Based on our interactions with the OSAP office, the answer is affirmative. However, the OSAP underwriter may require a letter from your Licensed Insolvency Trustee confirming that the grant you receive will not be allocated to debtors. We are more than willing to assist in writing this letter and help you resume your education.
2. Student Loans and Bankruptcy After 8 Years of Leaving School
If you left school 8 years ago, either by completing your course or dropping out, you may be contemplating if you can expunge your student loans. The Bankruptcy and Insolvency Act, specifically section 178, provides clarity on this matter. It states that if you ceased being a student seven years or more prior to declaring bankruptcy, your student loan will be wiped clean upon discharge. Consequently, if you’ve been out of school for over 7 years when filing for bankruptcy or a consumer proposal, your debt will be cancelled. To verify your last date of enrollment, contact NSLC or OSAP at 1-888-815-4514 or 807-343-7260.
3. Implications of Bankruptcy 6 Years After Leaving School
If you left school six years ago, the situation during bankruptcy is slightly different. During your Bankruptcy or Consumer Proposal, OSAP cannot demand payments from you. A portion of your contribution collected by the trustee will be allocated to the student loans. However, the interest on your loan continues to accrue despite you not making payments. Hence, we always recommend making payments that you can afford and using the Consumer Proposal or Bankruptcy to alleviate the strain of other debts.
4. Applicability of the 7-Year Rule on Bank Student Loans
If your student loan is from a bank and not the government, you might be wondering about the applicability of the 7-year rule. There are two possibilities: it could either be a government-guaranteed student loan or a student line of credit. In the former scenario, the 7-year rule is applicable. Conversely, in the latter scenario, the 7-year rule is not applicable, and the debt will be considered unsecured.
5. Impact on Co-signer if You Go Bankrupt
If your spouse co-signed your student line of credit, and you’re contemplating bankruptcy, you may have concerns about the financial implications for her. Whenever there’s a co-signer, if the primary debtor files a Consumer Proposal or Bankruptcy, the co-signer will be held responsible for 100% of the remaining debt.
Feel free to reach out to us for any further queries and we will ensure that this guide is updated accordingly.
