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7 year rule

Hi, I was told that student loans can be discharged after 7 years but that the student loans people can oppose your bankruptcy on the grounds that your education is a life time asset and can have the courts make you pay a percentage of your loan amount before you get your discharge. Is that what happens or is that just a rumor?

Posted from: Ontario

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One Response to “7 year rule”

A licensed trustee said...

You’ve got a couple of things sort of mixed together…

First, student loans are not dischargeable by bankruptcy or a consumer proposal unless you’ve been out of school for more than 7 years. The seven years start as of your official “End of Study” date which the student loan centre keeps on file for everyone that borrows student loans.

If you file bankruptcy after the 7 year period has elapsed then your student loans are dischargeable by bankruptcy.

BUT… any creditor has the right to apply to the Court to request you make additional payments towards your debts (all of your debts, not just their loan). So, there have been cases when the student loan lenders have asked the Court to make people pay additional amounts at the end of their bankruptcy – the money goes to all of your creditors, not just the student loans. This is likely to happen in cases were the person that filed bankruptcy has a good income and is actually benefiting directly from their education (professional people are a good example).

So BEFORE you file, discuss your situation with your trustee – they should be able to tell you how likely your bankruptcy is to be extended.