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I’ve gone bankrupt, can I get OSAP? Student loans and bankruptcy Q&A.

22 May 2018

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Key Points

In this post we will provide you answers to frequently asked questions regarding student loans and bankruptcy.

Can I get OSAP while I’m in bankruptcy or a consumer proposal?

From our experience with the OSAP office, Yes! Sometimes the underwriter at OSAP will request a letter from the Licensed Insolvency Trustee stating that any funds given to you will not go directly to creditors. We are happy to write this letter and assist in whatever it takes to get you back to school.

I dropped out of school 8 years ago (or I finished school 8 years ago) can I erase my student loans?

Absolutely, section 178 of the Bankruptcy and Insolvency Act states that for a student that has ceased being a student at least 7 years prior to the insolvency the student loan will be erased upon discharge. In other words, if you have been out of school for more than 7 years when filing a Bankruptcy or Consumer Proposal the debt will be erased. Call NSLC or OSAP to confirm your last enrollment date at 1-888-815-4514 or 807-343-7260.

Read our guide – What happens to debt when someone dies in Canada?

I dropped out (or finished school) 6 years ago, what happens during bankruptcy?

During the time of your Bankruptcy or Consumer Proposal, OSAP will not be able to chase you for payments and a portion of your contribution collected by the trustee will get paid to the student loans, but interest will continue to grow even though you aren’t required to make payments. We always suggest making payments you are comfortable with and using the Consumer Proposal or Bankruptcy as a time to alleviate the stress of other debts.

My student loan is from a bank, not the government, does the 7-year rule apply?

There are two scenarios, one in which it is a government-backed student loan and the other is a student line of credit.

In the first scenario, the 7-year rule will apply, while in the second scenario, the 7-year rule does not apply and the debt will be considered unsecured.

My wife co-signed my student line of credit, if I go bankrupt will she owe it?

In all scenarios where there is a co-signer, the co-signer will become liable for 100% of the remaining debt if the primary debtor files a Consumer Proposal or Bankruptcy.

Reach out to us with more questions and we’ll be sure to update this blog post!

905-479-5712 or joshua@harrispartners.ca