Dealing With Student Loans in Canada | Trustee Tips!

Life happens, and sometimes paying off student loans can feel impossible. But if you’re struggling, the good news is that you always have options to help give you some breathing room.

In Canada, student loans actually have some unique rules and regulations when it comes to bankruptcy and consumer proposals. So let’s unpack the relationship between student loans and these debt relief options, and look at how our Licensed Insolvency Trustees can help you find a way forward.

Why student loans matter

For many Canadians, student loans make higher education possible. They’re usually offered by the government or private lenders, with interest rates and repayment plans designed to be manageable. But of course, things don’t always go as planned. Unemployment, medical issues, or unexpected expenses can make repaying these loans tough.

What is bankruptcy?

Bankruptcy is a legal way to hit the reset button when you’re drowning in debt. It involves giving up non-essential assets (think jewelry, pricey electronics, second cars) to pay back creditors, and wiping out most remaining debts. But when it comes to student loans, things work a little differently.

Student loans and bankruptcy in Canada

Here’s the catch: Canada has a rule that says you can only include student loans in bankruptcy if it’s been at least seven years since you were last a student.

This “7-year rule” was introduced in 1997 to protect lenders. While it gives them some security, it can feel like an uphill battle for borrowers who are genuinely struggling.

Read our guide – Tips on how to manage your student debt and loans

An alternative: Consumer proposals

If bankruptcy isn’t an option, a consumer proposal might be the next best thing. It’s a formal agreement where you offer to pay back part of your debt over time—usually within five years.

A Licensed Insolvency Trustee oversees the process, making sure everything is fair and legal. Like bankruptcy, the “7-year rule” applies to student loans here, too. But creditors often prefer consumer proposals because they’re more likely to get some of their money back.

How our Licensed Insolvency Trustees can help

Dealing with debt is stressful, but you don’t have to do it alone. A Licensed Insolvency Trustee is a government-regulated professional who knows all the ins and outs of debt relief.

They’ll help you:

• Understand your financial situation.
• Weigh up all your options, including bankruptcy and consumer proposals.
• Create a plan tailored to your needs.

An LIT is there to guide you every step of the way, guiding you towards the best decision for your future.

Take the first step

If student loan debt is weighing you down, it’s time to explore your options. At Harris & Partners, our Licensed Insolvency Trustees are here to guide you through the process with compassion and expertise.

Whether it’s understanding bankruptcy, a consumer proposal, or finding other debt relief solutions, we’ll work with you to create a plan that fits your unique situation.