FRANÇOIS GILBERT – Licensed Insolvency Trustee (LIT)
In today’s article, we will explain what to do when the cost of your student loans is more than you can afford to pay.
It is possible to repay your loans for less than what you owe?
YES – In as little as a few months, up to 5 years!
With the expert advice of a Licensed Insolvency Trustee (LIT)…
You could repay your student loans at a lower rate (i.e. 3 cents to 1 dollar), find an affordable payment plan, or request a release from your debts in order to start over completely. Today, we’ll discuss the top solutions for those burdened by student debt so that you can make an informed decision and choose the right one for you.
Struggling To Afford Your Student Debt? You Are Not Alone
As the economy changes and less well-paying jobs are available to those with a university education, more people are struggling to make their student loan payments.
If you are a recent graduate, there are quite a few resources in place to help.
Anyone who’s been out of school for seven years or longer should consult a Licensed Insolvency Trustee (LIT) for student debt relief.
In Canada, the laws surrounding student loan debt are quite different than those for unsecured debts such as credit cards and other personal loans.
You could save thousands of dollars and significantly reduce your stress by learning what your options are.
- Rules & Eligibility
- Student Debt Resources
- Student Debt & Consumer Proposals
- Student Debt & Bankruptcy
- Get Professional Advice
Rules & Eligibility
If you have looked into student debt assistance, you likely encountered a few different repayment options.
But are they created equal? Do you qualify?
In most cases, the most important deciding factor for eligibility is the number of years it has been since you were enrolled in part-time or full-time schooling. According to Canadian law, a person cannot file for a student consumer proposal or bankruptcy until 7 years have passed since they attended school.
Has it been 7 + years since you attended school?
- Yes? Then you can file a consumer proposal or student loan bankruptcy* if you wish (Note* not to be confused with personal bankruptcy).
- No? Any student loan organization or the National Student Loan Service Centre can help you find a payment plan.
Student Debt Resources (<7 years)
The first few years after college or university is often the most financially difficult. It can be especially hard to make loan payments if you are receiving an entry-level wage or having difficulty finding work.
The good news: there are also a lot of helpful resources.
Student loan organizations have many resources and debt repayment plans designed to help manage student loan debt.
These include, but are not limited to:
- Interest-only fees or reduced monthly payments.
- Extending the term for loan repayment.
- Pleading financial hardship – in this case, your interest would be reduced for 10 years, and the amount of the loan would also be decreased. There are specific guidelines you must meet in order to be approved.
Keep in mind:
In general, these types of payment plans will tie you into debt for a more extended period of time = more money spent on interest.
If a person is nearing the 7-year requirement, it may be advisable to wait until they are eligible to file a consumer proposal.
Student Debt & Consumer Proposals (7+ years)
Are you no longer able to make your student loan payments? It’s essential to act quickly to avoid more severe legal action.
Every year thousands of Canadians choose consumer proposals for student debt relief.
Here are just a few of the reasons:
- You repay your debt at a much lower rate.
- Zero-interest fees
- You will never pay more than you can afford
- You receive legal protection from creditors
- Your debts will be consolidated into one simple payment every month.
- Your proposal can range anywhere from a few months up to a 5-year term – you decide
- Your assets are safe
At Fontaine & Associates, a Licensed Insolvency Trustee (LIT) will meet with you to evaluate your finances and determine whether a consumer proposal is right for you. If so, you will work together to build a proposal based on what you can reasonably afford. Your licensed trustee will file the proposal and handle any subsequent negations with your creditors on your behalf.
Your creditors will have 30 days to either accept or reject your proposal. The final decision is based on a majority vote amongst creditors. A consumer proposal is legally binding. Even if one of your lenders voted against the proposal, they would still have to abide by the majority ruling. While this may seem like a 50/50 scenario, our LITs are experts at creating proposals that have a success rate of over 90%. Once your consumer proposal has been formally accepted, you will be one step closer to achieving debt freedom.
Consumer Proposals (< 7-year requirement)
You may file a standard consumer proposal for unsecured debts at any time, even if you have new student loans.
If you are under the 7 year period, your proposal will cover all other debts such as credit cards, personal loans, etc., but your student loans will remain separate from the proposal.
This can actually help your student debt.
- Collections for student loans will stop during a consumer proposal, but you will have the ability to make payments at any time you wish.
- A consumer proposal will reduce your monthly credit bill, significantly making it a lot easier to make student loan payments and possibly even pay them off more quickly.
- You have the opportunity to get back on your feet and maybe even get ahead of your student loans.
Student Debt & Bankruptcy (7+ years)
With student debt bankruptcy, private loans through lines of credit and/or credit cards are accepted. A Licensed Insolvency Trustee will be able to tell you exactly what your options are and which type of debt resolution would be the best for you.
- Full discharge – if the courts decide to discharge all debts, no further payment is required.
- Partial discharge – if the courts decide only to discharge part of what is owed, you will be responsible for the remaining amount. This number is usually determined based on your finances. One example of how this might be divided might be based on private vs. federal loans (i.e. the courts may discharge private loans but require payment for federal loans through a payment plan).
- No discharge – if the courts decide against discharging you, then you must pay your student debts in full. Typically they will take some action to assist you, such as lowering your interest rate.
There is no guarantee of discharge from student debt through bankruptcy, but it is a possibility.
Helpful Tips For Those < 7 Years:
- If you are close to the 7-year threshold, it may be worth waiting a little longer so that you can access a consumer proposal or student debt bankruptcy.
- If you have a lot of non-student loan debt such as credit cards and personal loans, you could benefit from filing a regular consumer proposal. This way, you can clear up some of your debts and make it easier to manage your student loan debt.
- If you are in severe financial trouble due to circumstances beyond your control, you may meet the requirements for financial hardship, which could lower or eliminate your interest and reduce your payments.
Still unsure which option is best for you?
Licensed Insolvency Trustees are experts in debt relief and will be able to help you find the best solution for your financial situation.
A consultation is always free. You are never under any obligation.
Knowing and understanding your options could save you thousands of dollars and reduce your stress and worry. A Licensed Insolvency Trustee will be able to connect you with helpful resources and debt solutions. Debt resolution can be a complicated process, and the right professional will be able to simplify the process.
Even if the options seem pretty straightforward, a plan tailored to your specific situation is almost always better. We suggest getting in touch with a knowledgeable person who can lay out the pro and cons you may not be aware of.
At Fontaine & Associates, we are committed to:
- Saving you money
- Answering your questions
- Helping you achieve debt freedom
Call 1-877-241-6018 to make an appointment and get back on track!
Licensed Insolvency Trustee (LIT)
Francois obtained his CPA accounting designation in 1995, his CIRP insolvency designation in 1998 and became a Licensed Insolvency Trustee (LIT) in 1999. He has been working in the field of insolvency since graduating from University of Ottawa in 1991 and has been with Fontaine & Associates since 2002. Prior to that, Francois was working in the Ottawa office of PwC.
Francois has been helping individuals solve their debt problems now for over 20 years by providing advice on credit counselling, consumer proposals and personal bankruptcies. He also has extensive experience in business restructuring.
When he is not at work, Francois spends most of his time with his wife and kids doing outdoor activities and he also volunteers with local non-for-profit organizations in the Ottawa area from time to time. He is an avid musician and plays the keyboard, mainly for his own enjoyment.