Answer: No, your trustee is not wrong.  If the proposal is accepted, student loans are included in the proposal, provided you have “ceased to be a student” for more than 7 years prior to filing the proposal.  Obviously it’s more than 7 years between 2001 and 2010, so your student loan is included in your proposal.

There are a number of student loan lenders that have very poor systems.  There are numerous cases where, even though they voted to accept the proposal, they still send out collection letters, because “the left hand doesn’t know what the right hand is doing”.

Ask your consumer proposal administrator to send another letter to the lender, and that should be enough to put a stop to it.

Answer: A student loan is automatically discharged if you file for bankruptcy in Ontario if it has been over seven years when since you ceased to be a student when you file for bankruptcy.

So, the answer to your question is this: if you are a recent graduate and you go bankrupt, your student loan will not be discharged in your bankruptcy.  However, if you have been out of school for more than seven years, your student loan will be automatically discharged.

For more information, please consult the student loans and bankruptcy information site.

Answer: A student loan is automatically discharged in a consumer proposal or a bankruptcy if you have been out of school for more than 7 years at the time of filing. Prior to July 8, 2008 the rule was ten years.

Therefore the answer to your question will depend not on when the proposal ends, but when it was filed. You should consult your trustee for further information, and to determine which dates are relevant in your situation.

My student loan is the biggest obstacle and I haven’t been able to make payments on it for sometime. Bankruptcy is the last resort for me and I think I’d be okay if I could just get rid of this student loan.

Answer: A student loan can only be discharged by paying it in full, making a settlement with the lender, by filing a consumer proposal, or by declaring bankruptcy. You could contact the lender and see if you can work out payment arrangements. If not, it may be necessary to consider one of the other options.

If you haven’t been able to make payments on it for some time, it is likely that your income isn’t sufficient to continue servicing it even if they did reduce the interest, so a proposal or a bankruptcy may be the only logical option.

Answer: Yes, a student can go bankrupt. Anyone can go bankrupt, provided they have more than $1,000 in debts, and they are unable to pay those debts.

The real question is: should a student go bankrupt? In most cases a person declares personal bankruptcy because they are unable to pay their debts, and they don’t want their paycheque to be garnisheed. They are going bankrupt for protection from their creditors. If you are in school full time and are not working, you don’t have wages, so there is nothing to garnishee.

There are costs to going bankrupt. You will be required to make a monthly payment to the trustee, and you will lose your GST credits and tax refunds while bankrupt. You must decide whether or not it is worth it to incur this cost while you are a student. A licensed Ontario bankruptcy trustee can provide you with more information.

There are specific rules if you go bankrupt after you graduate, and if you have a student loan. More information is available on the student loan bankruptcy Canada website.

Answer: Effective July 2008, the rule is as follows: Student loans are automatically discharged in a bankruptcy if you have “ceased to be a student” for more than 7 years. Since you were last a student in April 2004, it has not been seven years, so your student loans, even the ones from 1999, would not be automatically discharged in a bankruptcy.

There is another rule that says that, in the case of extreme hardship, you can apply to the bankruptcy court to have your student loans discharged after 5 years (instead of 7), so one option for you would be to wait until your student loans are 5 years old and then go bankrupt. However, there is no guarantee that the court will discharge your student loans.

Further information can be found on the student loan bankruptcy canada web site.

Answer: Yes, you can file bankruptcy in Ontario without a job. However, most residents of Ontario that file bankruptcy are going bankrupt to prevent their wages from being garnisheed; if you have no wages, because you are not working, it may not be necessary to file bankruptcy until you return to work.

The rules governing a student loan and bankruptcy will determine whether or not your student loan would be discharged in a bankruptcy. In simple terms, if you have been out of school for more than seven years, your student loan will be discharged when you go bankrupt. Whether or not the file is with Revenue Canada is irrelevant. Contact a bankruptcy trustee for more information.

Answer: You have three options.

First, keep paying until the loans are paid off; this will have the best impact on your credit, but with the interest is obviously very costly.

Your second option is to declare bankruptcy. If you have been out of school for more than 10 years your student loans will be automatically discharged in the bankruptcy. The rules are somewhat complex; more information is available on the student loan bankruptcy canada web site. Once the bankruptcy is finished you can begin to re-build your credit. You are correct that the bankruptcy remains on your credit report for seven years, but if you have a good job and can save money you can generally re-build your credit in a much shorter period of time.

Your final option would be to file a consumer proposal, where you offer a settlement to your creditors. If you have family that can help, it may be possible to offer a lump sum to the creditors of an amount less than the full amount owing, and they may be willing to write off the remaining balance. Whether or not they will accept the consumer proposal depends on your level of debt, your family income, and your other assets.

You have options, so we suggest you contact a licensed trustee in Ontario for a no-charge initial consultation to review your options.

Large portion of my proposal was due to my student loan.

What will happen at the end of the proposal with my student loan considering that it would be 10 years passed from my graduation?

I have heard that soon the law in this regard would change to 7 years? is that true? and if it is, then what should I do in order to get rid of this student loan?

Thanks a mil.

Answer: The answer depends on your proposal. Under rules in effect now (spring 2008) a student loan is only automatically discharged in a bankruptcy or consumer proposal if you have been out of school for ten years when you file the proposal, unless the student loan creditor specifically votes in favour of the proposal. You should contact your trustee (the proposal administrator) to ask how the student loans people voted.

If they did not vote in favour, it is possible that they will pursue you for the loan once the proposal is completed. You may then need to go to bankruptcy court and ask the bankruptcy judge to discharge your student loan (which he may or may not do).

New student loan rules have been proposed, which will lower the waiting period from 10 years to 7 years; those rules are expected to come into force later in 2008. Full details on student loans and proposals and bankruptcy can be found on the student loan bankruptcy Canada web site.

Answer: Personal bankruptcy in Ontario may not be the correct option for you.

First, under current rules (early 2008), student loans are not automatically discharged in bankruptcy until you have been out of school for ten years. Therefore, if you went bankrupt today, your student loans would not be automatically discharged. New rules have been proposed by the federal government, and we expect them to come into force later in 2008 or early in 2009. The new rules will reduce the waiting period to seven years, so if you plan to go bankrupt, it may be wise to wait until the new rules come into force.

Up to the minute information on student loans and bankruptcy can be found on the Student Loans Bankruptcy Canada web site. On that site, and on this site, you can sign up for a free e-mail alert service that will alert you to when the new rules come into force.

Second, there are a number of negative implications to bankruptcy. The cost of bankruptcy increases with your family income, so it’s possible that a consumer proposal may be a better option. Without knowing your full circumstances it is impossible to give you a more precise answer.

A licensed Ontario bankruptcy trustee can provide you with more recommendations on your specific situation.