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Declaring Bankruptcy in Ontario & Student Loans

filing bankruptcy with student loanOne option for people who are struggling to pay their debts and handle their financial commitments is declaring bankruptcy. Ontario student loans are one financial commitment that many people have difficulty paying. The average student loan debt in Canada is about $27,000 and stats show that it takes about 14 years for a graduate to pay off student loans in full. This is a big financial burden for people, so it is understandable that many people find themselves looking for student loan debt relief.

Government guaranteed student loans can only be included in a bankruptcy if you have been out of school for more than seven years. You must be out of school completely for seven years in order to include these loans in your bankruptcy.

If you have been out of school for five years, you can apply to the court stating that paying your student loans will cause you undue financial hardship. In this case, you will need to show that you have made reasonable efforts to pay your student loans. However, this does not guarantee that you will be able to include the loans in a bankruptcy. It will depend on your particular situation and case. In general, the majority of situations require you to be out of school completely for seven years before you can include government backed student loans (such as Ontario student loans) in a bankruptcy filing.

 

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Student Loans Less than Seven Years Old

If your loans are less than seven years old, there are still options available to you. In fact, filing for bankruptcy or a consumer proposal may still be beneficial, depending on your particular situation.

When you have large student loan payments to make, you may not be able to afford the rest of your living expenses. Recent graduates have a number of big expenses (such as homes, weddings, car purchases, travelling, children, etc.) in addition to standard living expenses (food, clothing, transportation, etc.). These costs quickly add up. When you add in the fact that many new graduates struggle to find well-paying jobs in their fields, it’s easy to see how affording all of these expenses becomes very difficult.

This leads to many recent graduates taking out unsecured lines of credit or making purchases on credit cards in order to get by. Situations like this often result in large amounts of debt that are very difficult to pay down. If you are in this situation, bankruptcy or consumer proposal may be processes that could help you. While these processes will not include student loan debts if you have not been out of school for at least seven years, they will include your other unsecured debts. Eliminating these debts can reduce your financial stress and put you in a better financial position. This could allow you to make your student loan payments as they become due.

If you are dealing with a large amount of debt that you are having difficulty paying, speaking with a bankruptcy trustee can help. He or she can review your situation and provide you with the options available to you.

Student Loan Debt Relief Help

There are other options available to those who are unable to pay back their student loans. The federal government as well as Ontario and other provinces offer Repayment Assistance Plans to those who are having difficulty paying down their student loan debts. In these programs, you may receive a reduction in interest or lower payments. The amount that you will pay back under a Repayment Assistance Plan is based upon various factors, including your family size and your family income, as well as other factors.

You will need to apply for the Repayment Assistance Plan and reapply every six months. These applications are made directly to the loan office of the province where your loan was issued. Contacting the student loan office in this province can help you understand the options available to you.

In addition if you qualify as someone with a “ severe permanent disability”  you may be able to have the loan forgiven

Declaring Bankruptcy & Ontario Student Loans

As you can see, there are options available to those who are struggling with Ontario student loans. Declaring bankruptcy is one option that may help, but there are other solutions as well. If you are struggling with debt, speaking with a Licensed Insolvency Trustee can help you understand all options available to you to get out of debt.