Student Loan Debt is a Problem
Canadian graduates are faced with higher and higher levels of student loan debt. Currently, the average student loan debt in Canada is about $27,000.
These high levels of debt can lead to serious issues. One possible issue is that it delays the “start of life” for many people. Consider it this way, when you first graduate from a postsecondary school, you likely won’t walk into a high paying job right away. In fact, many recent graduates have trouble finding work in their fields right away. Even if a person does get a job, there are many other expenses that occur during the first few years out of school.
In order to get your job, you likely had to spend money to buy clothing for work. You may also wish to buy a car. A bit later on you might consider purchasing a home. You may even want to get married and have children. All of these things cost money. You may not necessarily have this money if you’re earning an entry-level salary and also attempting to repay thousands of dollars in student loan debt.
This means that many people delay these life milestones for quite some time, which can cause problems. In other situations, people will still make the purchases they need. However, since they need to spend a lot of money repaying student loan debt, they often end up having to use credit cards, lines of credit and other loans in order to finance these purchases. This can be a problem as the more debt you have, the more difficult it becomes to pay down. Eventually, having a very large amount of debt can lead to financial difficulty and an inability to repay your debts as they become due.
Debt and Student Loan Debt Solutions
If you have a lot of student loan debt, you may find it difficult to manage your expenses. This can eventually put you in a situation where you cannot pay your debts. If you are in this situation, you may wish to speak with a licensed trustee in bankruptcy. A trustee in bankruptcy (also known as a licensed insolvency trustee) is an individual who has been registered and is licensed by the federal government to administer bankruptcies and consumer proposals. A trustee can also review your financial situation and provide you with information on the available debt relief options.
Two possible options are submitting a consumer proposal or filing for bankruptcy. You can include student loan debt in either of these legal processes as long as you have been completely out of school for more than seven years. In some very specific cases, you can apply to have this period reduced to five years but, for most people, the waiting time is seven years.
However, if you have accumulated other debt during this time, you still may benefit from either of these procedures even if you have not been out of school for seven years. These procedures will deal with debt other than student loans which may help you re-establish your financial life
It’s important to note that you can only include unsecured debt in these procedures. Unsecured debt includes debts such as credit card debt, unsecured lines of credit, personal loans, bank drafts, department store cards and other such debts.
The Differences Between Bankruptcy & Consumer Proposal
While both bankruptcy and consumer proposal are legal processes that are administered by a licensed trustee in bankruptcy, there are important differences between the two. Bankruptcy provides those who are unable to pay their debts with an opportunity to eliminate most (if not all) of those debts and receive a fresh start. With a consumer proposal, you make an offer to your unsecured creditors to repay a portion of the debt you owe over a period of time. The remaining outstanding debts are eliminated once the proposal is complete and all agreed upon payments are made.
For more information on the differences between these two processes, you will want to speak with a bankruptcy trustee. Most trustees offer a free consultation where they will review your financial situation and provide you with information on the available options.
While student loan debt can only be included in a bankruptcy or a consumer proposal if you have been out of school for more than seven years, these processes could still help you if your student loan debt has caused you to require additional loans in order to make ends meet. Speaking with a trustee can help you decide if either process is for you.