David Sklar & Associates Inc.

Consumer Proposal & Bankruptcy Trustees
Serving the Greater Toronto Area

Bankruptcy and Student Loans

As of July 2008, under the Bankruptcy and Insolvency Act, there are two conditions under which Student Loans may be discharged by Bankruptcy in Ontario: the Seven-Year Rule and the Hardship Provision.

Seven-Year Rule

If an individual’s Bankruptcy is filed seven or more years after they finished being a full-time or part-time student – then their Student Loans might be eligible for discharge.

Hardship Provision

If an individual is currently in a Bankruptcy, or was a bankrupt and it is five or more years after they finished being a full-time or part-time student - and they able to prove to the Court that they qualify for a Hardship Provision – their Student Loans might be discharged.

It should be pointed out that it can be very difficult to prove Hardship to the Court. The Court will closely examine such factors as:

• how did the debtor spend the student loans


• did the debtor work hard to complete their education


• did the debtor make a serious effort to repay their student loans


• did the debtor try to get loan repayment relief through the federal government, provincial government, and or the financial institutions who issued the student loans


• are the financial problems faced by the debtor likely to be long-term

Bankruptcy Trustee

If you are considering Bankruptcy and have Student Loans that you think the above two conditions might apply to you – you will need to discuss the matter with your Trustee.

Student Loan Repayment Relief

There are Student Loan Repayment Relief programs available through the Federal and Ontario Provincial governments. If you, or someone you know is having difficulty repaying their student loans please check out:

• CanLearn Repayment Assistance Plan
  
• National Student Loans Service Centre
  
• Ontario’s Interest Relief Program and Debt Reduction in Repayment Program (DRR)