Student Loans and the 7 Year Rule - Bankruptcy Canada
As it stands, around 41% of Canadians have debts of over $25,000 by the date of their graduations.
In fact, national averages stand at $26,300, a figure thought to be behind as many as 1 in 6 current Canadian bankruptcies.
The situation is so dire that experts are even going as far as to state that Canada is heading towards a student debt crisis.
But, any students considering bankruptcy as a solution will have to think again.
In reality, that 1 in 6 figure is misleading for one prime reason – such loans are exempt from bankruptcy as of their addition to the bankruptcy law back in 2008.
Now, students looking to clear themselves of debt need to think long and hard before approaching this matter.
What does the 2008 law change mean?
Effectively, this 2008 law change was put in place to protect the Candian government from an influx of rocketing unpaid student loans.
This is because, unlike typical, bank-based payments, student loans are funded directly from government saving pots.
As such, a sudden default across the board would surely lead to trouble.
So, where does this 1 in 6 figure come from, and how exactly can student debt prove such a pressing reason for bankruptcy in prime areas like Ontario?
To understand that, it’s vital to delve into the ‘7 year’ part of this law change.
Ultimately, student loans are only exempt from bankruptcy in the immediate aftermath of study.
This is, after all, the time when finances can prove most challenging, and incomes are harder to come by.
To oversee that issue, the student loan section of the Bankruptcy and Insolvency Act clearly states that at least seven years must have passed from a student’s last study date before they can clear debts through bankruptcy.
The hope, of course, being that the majority will have found job security by this stage.
When exactly was your last study date?
This rule leaves a lot of room for confusion from many ex-students seeking financial relief.
Primarily, last study dates often become points of contention.
This is an issue that can prevent much-needed financial relief, or set claims back for untold periods.
Hence, you need to know when your last study date was, and thus, when you’re free to file for bankruptcy.
Luckily, there are a few essential tips you can take to make sure you get this right, including –
Knowing the facts
The facts behind the law are often where the real revelations lie.
Most notably, for instance, the 7-year rule applies, not just to the course for which you hold the debt, but to any study you complete in the interim.
In other words, your loan term will be counted from the last day of your latest course, irrelevant of how long ago you officially graduated.
It’s also worth noting that there is a loophole in the fact you may be able to shorten this term to five years, but only if you can prove undeniable financial hardship.
Do note, though, that this would mean attending court and facing a bankruptcy lawyer.
Let professionals guide your way
Ultimately, the best thing you can do once you’ve been armed with the necessary knowledge is to bring professionals on board.
You can start here by contacting Canadian Student Loans team on 1-888-815-4514.
They’ll be able to confirm your last official study date according to act regulations, and will let you know for certain if enough time has elapsed.
Once you’ve verified that fact, bringing a trustee on board to handle your case can prove invaluable.
As well as sticking by you every step of the way, they’ll be able to talk you through everything, including:
- The ins and outs of the 7-year rule
- What your end study date means for your case
- How to avoid setbacks throughout your claim
- How to arrange your documents to ensure a smooth bankruptcy process
While understandable, student loans and the 7-year rule can pose significant problems for claimants.
Hence why, if bankruptcy is on your cards, you must take these steps towards understanding sooner rather than later.
One thing’s sure; your case stands the best possible chance if you have a professional fighting your corner.