Paying Student Loans During Your Bankruptcy or Consumer Proposal

Being saddled with substantial student loans can often feel like a never-ending burden. As the years roll on, the debts seem to loom larger, especially if previous obligations like student loans remain unsettled. However, there’s a ray of hope. If you’ve been out of school for more than seven years and find yourself facing bankruptcy, your student loan becomes a dischargeable debt.

Conversely, those who finished their studies less than seven years ago won’t have their student loans automatically discharged in a bankruptcy proceeding or settled via a consumer proposal. This article aims to shed light on navigating student loans during a bankruptcy or consumer proposal scenario.

What Happens to Student Loans in Bankruptcy

Filing for bankruptcy is a legal proceeding where an individual, unable to meet his financial obligations, can seek relief from some or all of his debts. If you’ve completed your studies more than seven years ago, your student loan debt becomes dischargeable upon filing for bankruptcy.

However, if you’ve been out of school for less than seven years, your student loan debt won’t be automatically discharged upon declaring bankruptcy.

Consumer Proposal as an Alternative to Bankruptcy

A consumer proposal is another legal process that allows you to negotiate a “payment plan” with your creditors to repay a portion of your debts over a specified period. It’s an attractive alternative to bankruptcy that can also help in settling your student loan debt if you’ve been out of school for over seven years.

The Seven-Year Rule

The seven-year rule is a crucial factor in considering whether your student loan debt can be discharged in bankruptcy or settled through a consumer proposal. If you’ve finished your studies more than seven years ago, such debts are eligible for discharge or settlement.

Stay of Proceedings

Regardless of whether your student loan debt is included in your bankruptcy or consumer proposal, a stay of proceedings is put into place. This legal process essentially freezes all debt collection or payments until the bankruptcy discharge or consumer proposal completion.

Continuing Payments

Despite the stay of proceedings, it’s advisable to continue payments if your budget permits. This will prevent the accumulation of additional interest on your student loan debt. Your loan provider might require a letter from your trustee, consenting to the continuation of payments during the bankruptcy or consumer proposal period.

Contacting the Canada Student Loans Service Centre

Before filing for personal bankruptcy or a consumer proposal, get in touch with the Canada Student Loans Service Centre. They can confirm your “end of study date,” ensuring it’s been at least seven years since you completed your studies.

Seeking Professional Advice

If you have queries regarding your student loan debt or any other debt, consider scheduling a free, no-obligation consultation with a licensed insolvency trustee.


Navigating the intricacies of student loan repayment during a bankruptcy or consumer proposal can be a daunting task. Understanding the nuances, such as the seven-year rule, the stay of proceedings, and the importance of continuing payments, can help you make informed decisions about managing your student loans.

Paying off student loans can be challenging, but understanding your options can make the process more manageable.

Remember, it’s crucial to seek professional advice before making any decisions regarding bankruptcy or consumer proposals. Your financial future is worth the time and effort to learn about your options and choose the best course of action.

Are you struggling with paying student loans during your bankruptcy or consumer proposal? Don’t hesitate to seek professional help. It’s never too late to take control of your financial future.

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