Discharging student loans through bankruptcy in Canada
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By Bromwich+Smith Staff | 1004 words | Reading Time: 5 minutes | Date: 2023/04/18
Student debt is it large concern for many Canadians, and you may be surprised at how high the national average has grown in recent years. In Canada the average student loan debt has now surpassed $28,000 for bachelors degree and over $15,000 for college graduates. The Canadian student financial assistance program averages that is now taking between 9 and 15 years for student loan debt to be paid off. Student loan debt has increased steadily across Canada but has the highest debt percentage in Nova Scotia with the average student loan debt being over $40,000. With this mounting dead it's not hard to see why millennials are struggling to get a foot up once they've graduated. Let's take a look at some options for discharging student loan debt in Canada.
What is the eligibility for discharging student loan debt through bankruptcy in Canada?
To be able to discharge student loan debt through bankruptcy there are a few items that must be met. The first being that the debt must be more than seven years old since the time of graduation and the money has become due. It is critical to understand how old your student loan debt is to determine if you're eligible for discharge before you continue with the bankruptcy process. There are some situations where this seven-year time frame may be reduced to five years if you are able to show financial hardship. He must demonstrate that you use your student loan for your education and living costs and that repaying your loan is causing I significant financial hardship. As bankruptcy is regulated through the Bankruptcy and Insolvency Act it is regulated and can only be filed by a Licensed Insolvency Trustee. Reach out to a Licensed Insolvency Trustee to learn more about the possibility of debt relief programs that include your student debt loan.
There is a schedule of tasks that you will need to do to be discharged from bankruptcy. You will work with your Licensed Insolvency Trustee to report your monthly income as the more money you make the more your bankruptcy will cost you. You will need to make payments and attend credit counseling as well as provide your income tax information. If you do not complete these tasks you will not be discharged and your debt will not go away.
Do I still qualify even if I didn't graduate?
Your student debt loan will still need to be paid off regardless if you graduated or completed your education. There are debt relief programs available untailored to help with student debt relief regardless of your graduation status.
Can all types of student loans be forgiven through a bankruptcy filing? Most government student loans cannot be discharged through bankruptcy in Canada in less all criteria has been checked. However private student loans may be discharged through bankruptcy without needing to follow that the individual has been out of school for at least seven years.
Are there fees or costs associated with student debt forgiveness? Yes there are fees associated with filing a bankruptcy in Canada. This includes your filing fees and legal fees an will be outlined to you by your license insolvency trustee. The amount will vary depending on a number of factors including the province in which you are filing for bankruptcy, if you have filed for bankruptcy previously, and the number of assets that are able to be liquidated to paying off the debt owed.
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What are the pros and cons to filing bankruptcy?
There are a number of pros when it comes to filing for bankruptcy in Canada. When you file for bankruptcy you will receive an automatic stay of proceedings which means you are given immediate creditor protection. Your creditors are no longer able to contact you for debt or take legal action against you including wage garnishments collection phone calls or letters. Once you are discharged from your bankruptcy you are essentially debt free well you were able to eliminate most of your unsecured debt there will be some debts that cannot be discharged including court fines, child support, alimony payments, and student debt that is less than seven years old. You will also no when your bankruptcy is discharged this means you will know when you have a clean credit report and will be able to set a plan in motion to start rebuilding your credit during and after your bankruptcy.
As with any situation there are downsides to filing for bankruptcy. The first thing that many people think about is there a credit score. Filing for bankruptcy will affect your credit ranking and will remain on your report for six years after discharge of your first time bankruptcy. This is extended to 14 years if this is your second time filing. What many people are not aware of is that if they have been missing payments or have requested additional credit which has been denied the chances are their credit rating is already low and has already been affected negatively.
You will be required to liquidate some of your assets However you will not lose everything as you may fear. Some of the non exempt assets include RESPs, RRSPs, 1 family vehicle up to $5000 value. You may qualify to keep the equity built into your home, but will need to work with your license insolvency trustee to find out the regulations in your province.
While it is possible to discharge your student loan through bankruptcy in Canada it is important to meet the eligibility criteria in to follow the guidelines for this specific debt. Working with the license insolvency trustee will help you find answers and a support system to getting back on track. You do not need to struggle with your student debt on your own Bromwich plus Smith has a number of strategies to help you get back on track today. Reach out today free no obligation confidential consultation to learn more about the options available to you. Bromwich+Smith’s Debt Relief Specialists are available by phone at 1-855-884-9243 , or request a call back at contact us page.