Student Loans and Bankruptcy

What happens to my student loan if I declare bankruptcy ?

If you declare bankruptcy seven or more years after the date on which you ceased to be a full or part-time student, your student loan debts will be eligible for discharge along with your other debts.  If it has been less than seven years since you ceased to be a full or part time student, the debt will not be discharged and will survive the discharge of your other debts.

If your student loan debt survived your discharge, the Bankruptcy and Insolvency Act has a “hardship provision” available for those who continue to have trouble meeting their payments.  This is a Court application that is made by the debtor.  A pre-requisite of this hearing is that it must also have been at least five years since you have been a full or part time student.

At the hardship application, the Court may discharge your student loan debt if it is satisfied that you acted with good intentions in connection with your obligation to repay your student loans, and that you have experienced, and will continue to experience, financial difficulty that prevents you from repaying the debt.  The Court will also look at how debtors used student loan money, their efforts to complete their educational program, their efforts to repay the loans and their use of available interest-relief programs.

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