What Happens to My Student Loans in a Bankruptcy?

As a licensed trustee in bankruptcy, a common question that I get asked is something along the lines of “What happens to student loans in a bankruptcy?”

In order to answer this question, it is important to know if we are talking about loans provided through the Canada Student Loans Program or other loans for students, such as student lines of credit through a bank.

Government vs. Private Student Loans

Private Student Loans Can Be Discharged – With a Catch

A student line of credit through a bank or other financial institution is a debt that can be included in a bankruptcy, however; it is important to know if there is a co-signor on this debt. Sometimes banks require a co-signor when giving out these loans and that co-signor would still be responsible for the debt after you file for bankruptcy. This is something that can be discussed with a trustee to find out exactly what the situation is.

When Are Canada Student Loans Discharged?

Student loans through the Canada Student Loans Program can be included in a bankruptcy if they are more than seven (7) years old. That is – if your end-of-study date is more than seven years ago. I recommend that everyone with a student loan who is considering bankruptcy should call Canada Student Loans and ask what they have on file for the end of study date.

Contact Sean for a consultation at 709-221-5500.

What If I Went Back to School?

The end of study date can be confusing, especially if there has been a return to studies since the initial loans were obtained. Recent court decisions have held that the ‘clock’ does not reset on a student loan if the borrower returns to school later on, however, this is a bit of a confusing issue and is definitely something you should discuss with a trustee in order to find out where you stand.

What If It’s Been More Than 5 Years But Less Than 7?

If your Canada Student Loan is less than seven years old but more than five (5) years old, and you file for bankruptcy,y you might be able to make an application for what is called ‘hardship’. Again, if you think this applies to you, it is best to contact your trustee to find out more.

Need Help with Student Loans and Bankruptcy?

For more information on anything relating to your student loans and how they might be impacted by a bankruptcy, please contact me at 709-221-5500 or sean@srtsack.ca.

Alternatively, read more about our Student Loan Debt Solutions here.

Sean R. Stack, MBA, CIRP

Trustee in Bankruptcy