Question: I am dating a lady who is unable to pursue her chosen profession as a massage therapist due to a medical condition. Her employment provides an income of approx $1200 per month, and after rent, insurance, gas and student line of credit payments she is left with virtually nothing. Her income level is far below the poverty level. The RBC consistently freezes her account or takes double interest payments leaving her with nothing for food.
Can she declare bankruptcy on a student line of credit? Her debt is greater than it was 8 years ago.
The bank refuses to negotiate a fixed payment plan for her as she is considered a high risk. Is there anything we can do?
Answer: There is an obvious first step for your friend: open a new bank account at a new bank where she doesn’t owe any money. Then, close the bank account at RBC. If you owe the RBC money, and there is money in your RBC bank account, it’s easy, and legal, for them to simply take their payment out. However, if you are banking at a new bank that RBC doesn’t know about, they can’t take payments out.
Opening a new bank account eliminates the urgent problem of having your old bank account frozen. That may be enough of a solution for your friend, although obviously it’s not a full solution, as the debt still exists.
Your friend has a few other options:
First, she could simply stop paying them. If her income is only $1,200 per month, she doesn’t have the ability to pay them, so she doesn’t. This solution becomes a problem if the bank decides to take her to court and garnishee her wages.
Her second option is to offer a settlement, perhaps in the form of a consumer proposal. Unfortunately with only $1,200 in income this will be very difficult, since she doesn’t have the money to offer anything each month.
Her final option is personal bankruptcy. A student line of credit from eight years ago would be dischargeable in a bankruptcy. However, even declaring bankruptcy costs money. Most trustees in Ontario will require a minimum contribution of approximately $200 per month for a minimum of nine months, and she would also lose her tax refund for the year of bankruptcy. She needs to decide whether or not paying that money is worth it to officially discharge her debts.
She should consult an Ontario bankruptcy trustee to review her options in more detail before making a final decision.
