What Happens To My Student Loans If I File For Bankruptcy?

With the higher cost of post-secondary tuition, coupled with the difficulty for many graduating students to find employment in their profession, it is not surprising that we see a rise in the number of insolvencies involving student loans.

What happens if you leave school but can’t find a job earning enough to pay off your student loans?

Filing bankruptcy in Ontario can help eliminate your student loan debt however there are certain conditions that must be met:

  1. A government guaranteed student loan is only automatically discharged in a bankruptcy if you have been out of school for seven years. You cannot have attended even one class during the past seven years to qualify.
  2. If you have been out of school less than seven years but more than five, you can apply to the Court under financial hardship provisions. The court will need to be convinced repaying your student loans will cause undue financial hardship and that you have made reasonable efforts to repay your student loans prior to this point.

Even if your student loans will not be discharged by a bankruptcy, you may still benefit from filing a bankruptcy or making a proposal to your creditors. Eliminating other debts may free up enough cash flow to allow you to repay your student debts on your own.

The rules surrounding bankruptcy and student loan debt are complicated, particularly with respect to how the seven year period is calculated. If you are struggling with student loans and other debt contact an Ontario Bankruptcy Trustee today.