Are Student Loans Discharged by a Proposal or Bankruptcy?

If you ceased to be a full or part time student seven or more years ago then your student loans will be “released” by your discharge from a proposal or bankruptcy.

If you ceased to be a full or part time student less than seven years ago, then your student loans will not be released by a proposal or bankruptcy.  While you are going through your proposal or bankruptcy; however, you are not required to make payment to your student loans (be aware that interest may still accrue).  This reprieve, coupled with relief from the burden of your other debts like credit cards, will often put you in a position to tackle your student loans once the proposal or bankruptcy is finished and your finances are healthier.

Also, if your student loans survive your bankruptcy or proposal and you are still experiencing financial difficulty, you can apply to the bankruptcy court for an order declaring your student loans discharged.  This can be done if you have ceased to be a full or part time student for five or more years.  Usually you would hire a lawyer to assist you in this process since you must satisfy the court that you have acted in good faith and also that you have and will continue to experience financial difficulty.

If you would like to know more about how student loans are affected in a proposal or bankruptcy please do not hesitate to contact us.


By:  Brenda D.  Owens, Trustee in Bankruptcy

Brenda works for James R. Yanch, Trustee in Bankruptcy
215 Simcoe St. N.
Oshawa, Ontario
L1G 4T1
905-721-7506
www.jamesryanch.com