I met a long term client today who has returned to school to upgrade his skills, and has accumulated a fair amount of debt, including a $40,000 student line of credit from a major chartered bank. He needs relief from all his debts, but if he cannot get relief from the student line of credit, then he would rather just gut it out. For now, while he is in school, the minimum monthly payment is interest only.
The reason for concern is the Bankruptcy and Insolvency Act (BIA) does not grant relief for “any debt or obligation in respect of a loan made under the Canada Student Loans Act, the Canada Student Financial Assistance Act, or any enactment of a province that provides for loans or guarantees of loans to students where the date of bankruptcy of the bankrupt occurred……within seven years after the date on which the bankrupt ceased to be a full- or part-time student…..”
Please note that paragraph above is not complete; there is actually a much longer list within the Act which spells out more conditions; the seven year rule tends to be the one most often cited. The Rumanek and Company website has an excellent, comprehensive article on this topic, and if you are in this situation, I suggest you read this article.
Back to my client – so here’s the deal.There is a very good chance this is just a normal unsecured line of credit with the word “student” tagged on – in which case it can be included in an insolvency process, and he will get relief from them in a consumer proposal or a personal bankruptcy.
The only time that is not the case is if his student line of credit is government backed in some way – and it’s possible that could be the case and he may not necessarily know it. So it’s back to the fine print. To be sure, I asked him to provide copies of the actual loan agreements he was given when he first took out the loans, and our trustee will examine them in advance.
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