Student Loans FAQs | Student Bankruptcy Advice

Student loans can be a significant burden, especially when financial circumstances take a turn for the worse. In this comprehensive guide, we’ll tackle some of the most frequently asked questions about student loans and bankruptcy.

Introduction to Bankruptcy and Student Loans

Bankruptcy is a legal process that provides relief to individuals who are unable to pay their debts. When it comes to student loans, the rules around bankruptcy can be complex. In this section, we’ll introduce some of the key concepts.

Eligibility for OSAP During Bankruptcy

Many students wonder if they can be eligible for the Ontario Student Assistance Program (OSAP) while in bankruptcy or a consumer proposal. From our experience with the OSAP office, the answer is yes. OSAP may require a letter from the Licensed Insolvency Trustee stating that any funds granted will not go directly to creditors.

Erasing Student Loans Post-Bankruptcy

Section 178 of the Bankruptcy and Insolvency Act states that if a student ceased to be a student at least seven years prior to the insolvency, the student loan will be erased upon discharge. This means that if you have been out of school for more than seven years when filing a Bankruptcy or Consumer Proposal, the debt will be erased.

Student Loans from Banks

Not all student loans are created equal. Those that are backed by the government follow the seven-year rule, but if the loan is a line of credit from a bank, the rule does not apply, and the debt is considered unsecured.

Implications for Co-Signers

If someone co-signed your student line of credit and you declare bankruptcy, the co-signer will become liable for 100% of the remaining debt. It’s important to understand this before filing a Consumer Proposal or Bankruptcy.

Rebuilding Your Credit

After bankruptcy, rebuilding your credit is crucial. It’s a process that takes time and patience, but with the right guidance and tools, you can improve your credit score and regain financial stability.

Debt Relief Options

There are several options available for those seeking debt relief. These include debt consolidation, debt settlement, and credit counselling. Each option has its pros and cons, and the best choice depends on your individual circumstances.

Understanding Debt Management

Debt management is an important aspect of maintaining financial health. It involves tracking your debts, making regular payments, and creating a budget that allows you to live within your means while paying off your debts.


Student loans and bankruptcy are complex topics. It’s important to understand the implications of bankruptcy on your student loans, as well as the options available to you for debt relief and credit rebuilding. Always seek professional advice when dealing with these issues.

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