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Types Of Debt

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Student loans are defined as financial assistance by way of a 100% government guarantee. There are two types of student loans: federal and provincial student loans. The loans are governed by federal law under the Canada Student Loan Act.

Increase of Student Loan Debt in Vancouver and BC

In the past decade student loans, and the inability to repay them, have increased dramatically. As tuition increases, the wages for entry level jobs has not, and more and more people are finding themselves with massive student loan debt in Vancouver and throughout BC.

BC has one the highest levels of average student debt at $34,886 per student. Further, BC has the highest interest rates on student loans at 2.5% above prime.

What Are Your Options?

1. Repayment Assistance Plan

If you cannot afford to make the payments on your student loans, the federal government has a program called the Repayment Assistance Plan.

The purpose of RAP is to reduce your monthly payments to a manageable level. Sometimes a debtor can even have the loan forgiven. The payments will be calculated using your family income and family size, and your payment cannot exceed 20% of your family income. If you are eligible for the plan, your maximum repayment is capped at 15 years. You have to reapply for the plan every six months and your eligibility is constantly reassessed.

To see whether you are likely to qualify for the Repayment Assistance Plan, visit the link below and input your information into the estimator.

Repayment Assistance Estimator

If you are eligible you can apply online through the National Student Loans Service Centre, or you can download a paper application and fax it in.

2. Bankruptcy or a Consumer Proposal

Student loans are automatically included in a bankruptcy / proposal. However, if it has NOT been more than 7 years since you ceased to be a full- or part-time student at the time you file, the loans will NOT be automatically discharged. In some instances, Canada Student Loans may apply to the Court for a Conditional Order of Discharge. If, for example, you have significantly high student loan debt in Vancouver or BC and you have obtained a degree and you are earning income from that degree, the court may order that some dollar amount be paid into the bankruptcy estate for the benefit of creditors.

Although 7 years may not have passed, and the loans will be considered non-dischargeable, the court may, after 5 years (rather than 7), order that the loans be discharged in the bankruptcy if they are satisfied that the bankrupt has acted in good faith in connection with the liabilities under the debt. In determining whether the bankrupt acted in good faith, the following factors may be considered:

  1. Was the money used for the purpose loaned?
  2. Did the bankrupt complete the education or make an honest effort to do so?
  3. Did the bankrupt derive benefit from the education in the sense of gaining employment in an area directly related to the education?
  4. Did the bankrupt make reasonable efforts to pay the loan or did the bankrupt make an immediate assignment into bankruptcy?
  5. Did the bankrupt take advantage of other options with respect to the loan such as interest relief or loan remission?
  6. Was the bankrupt extravagant or irresponsible with his or her finances?
  7. Did the bankrupt fairly disclose his or her circumstances on the application for the loan in the sense of acting with an honest intention?

The court will also take into consideration if the bankrupt has and will continue to experience financial difficulty to such an extent that the bankrupt will be unable to pay the debt. This is considered a hardship provision and is not granted to all those who apply for it. You must have made regular payments to the student loan, as well as prove that you will never be able to earn enough money to service the debt. It may or may not be worth making the application.

Speak with a licensed insolvency trustee in Vancouver or any of our locations in VernonPrince GeorgeVictoria and Surrey about whether or not they believe there is a likelihood of success. If you decide to take this route, you must already be in bankruptcy and may have to hire a lawyer to make the application. This can cost around $3,000 in legal costs, separate from the fees associated with the bankruptcy.

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