What can I do if I can't repay my Student Loans in Canada?

What can you do about your student loans?
If you are thinking of bankruptcy because of your student loans in Canada, we recommend the following:

1. List your income and expenses, and study them carefully for opportunities. You may find ways to reduce expenses and/or increase income, thereby making money available for loan repayment.
2. Negotiate new arrangements for repayment, with the lender. They may accept payments as low as $50 per month, which would buy you more time to get on your feet financially. Be sure to check whether you are eligible for interest relief.
3. It may be helpful to enlist a credit counsellor to negotiate on your behalf. Credit counsellors are listed in your Yellow Pages, or on www.moneyproblems.ca.
4. If you are not sure of the date when you left school, verify it with the school or the lender. The date will be important if you pursue a consumer proposal or bankruptcy.
5. If a collection agency is already hounding you, or if the above negotiation is unsuccessful, consider a consumer proposal. This is a formal agreement with your creditors to repay a portion of your debts. With student loans, a consumer proposal will more likely be successful if you have been out of school at least five years and the payback period will end at least 10 years after you left school. You will need a bankruptcy trustee to do a proposal, especially because the rules for student loans are complex, and it will be a negative item on your credit history. You will also need to be working, or have a steady income source.
6. As a last resort, consider bankruptcy. This may be helpful, but again with student loans the rules are complicated. You will need to contact a bankruptcy trustee in your area for advice as to how they will work in your case. Of course, bankruptcy would be a very serious negative item on your credit history – you would need to repair your credit to resume a normal lifestyle.

The Bottom Line
There are usually alternatives to bankruptcy, and a licensed bankruptcy trustee is the best person to help you determine what would work for your particular difficulties with student loans. Contact a bankruptcy trustee near you if you have a specific bankruptcy question, or to set up a no-charge initial consultation.