Many people swear off credit once they have gone bankrupt. In today’s society, however, it is difficult to get by without credit. Once you feel ready to manage credit, and you are confident that you can manage it responsibly, talk to your trustee about re-establishing your credit. An easy way to start is by making sure your cell phone bills are paid on time. Most carriers report your payment history to the credit bureaus, so it is best to remain up to date.
During the two financial counselling sessions during your proposal or bankruptcy we will advise you on re-establishing your credit. In addition we may refer you to specific lenders that can help if you need to finance a car or refinance your home.
Contact Rumanek & Company Ltd. for more information on bankruptcy and debt solutions. Or please fill out the free bankruptcy evaluation form. To learn more please visit our YouTube Channel. Rumanek & Company have been helping individuals and families overcome debt for more than 25 years.
Automatic Discharge: Where a first or second-time bankrupt has fulfilled all of his or her required duties, and where the Trustee is satisfied that an automatic discharge is appropriate, a certificate of discharge is issued by the Trustee directly. If the Trustee has sufficient concern to oppose the discharge, an automatic discharge is no longer available, and the discharge becomes a matter for the court.
Absolute Discharge: An absolute discharge is issued by the court. The debtor is discharged from all debts incurred prior to the date of bankruptcy, except those which by law survive bankruptcy.
Conditional Discharge: The bankrupt’s discharge may be granted conditionally when there are outstanding matters in the administration, such as fees, asset realization, or providing documents or tax information. A conditional order sets the requirements, and when they have been met, the Trustee sends a report to the court recommending that discharge now be granted.
Suspended Discharge:
This type of order is made when the current bankruptcy is not the first insolvency event (bankruptcy or proposal), or there has been serious misconduct by the bankrupt either before or during the bankruptcy. A suspended discharge means that the discharge will take place sometime in the future based on a date set by the court.
Refusal of Discharge: The court may refuse a discharge when it considers that the debtor does not deserve a discharge. An order of this type is extremely rare, and is usually a result of clear and severe misconduct or criminal activity by the bankrupt. A person who has filed repeated bankruptcies may also have a discharge refused, especially if the causes of bankruptcy are similar each time. If discharge is refused, a person remains in bankruptcy indefinitely, but is entitled to go to court after one year to apply for the refusal to be reconsidered.
Contact Rumanek & Company Ltd. for more information on bankruptcy and debt solutions. Or please fill out the free bankruptcy evaluation form. To learn more please visit our YouTube Channel. Rumanek & Company have been helping individuals and families overcome debt for more than 25 years.
Often, many individuals who are facing financial troubles and who may be contemplating either a Consumer Proposal or Bankruptcy will likely also have to consider the impact of their student loans within the process. This article is intended to provide some information regarding Bankruptcy and impact of student loans on the process.
Student loans are provided by the Government to encourage persons interested in pursuing a post-secondary education. Federal and Provincial Governments work with each other under a contractual framework for receipt and disbursement of funds by the Province for this purpose.
Government financial assistance is provided in the form of Grants and Loans. It is important to distinguish between a Grant and a Loan.
Financial assistance provided by way of Grants is not required to be paid back. However, financial assistance provided in the form of Loans, is statutorily required to be paid back.
It would also be pertinent to note that only students receiving admission to designated educational institutions, as mentioned under the Canada Student Financial Assistance Act S.C. 1994 are provided Government loans. In other words, the intended educational institution must be recognized by the Government. The loan agreement is entered directly between the Government and the qualifying student.
In Ontario for instance, the financial assistance program is called Ontario Student Assistance Program (“OSAP”). OSAP contains pre-requisite conditions regarding the eligibility, availability and repayment of the loan.
Re-payment of Student loans
The repayment period for the OSAP loan is 10 years. This can be extended for a period of 15 years by application and by demonstrating sufficient cause by the applicant. The student loan however, will become due and payable only after the student becomes a graduate. This is a key feature that makes Government programs such as OSAP more appealing to students as compared to loans from a private institution, where at the minimum, interest portions on the loan amounts become due immediately.
Students who take OSAP are provided with a grace period of 6(six) months after the time they cease to be students. The Loan becomes payable after this period.
Nevertheless, re-payment of student loans remains mandatory. Stringent measures are adopted by the Government to ensure re-payment of student loans, as failure to repay student loans jeopardizes the loan system resulting in large deficit of government funds. This hinders the ability of future students to benefit from government financial aid.
Non-repayment of student loans can cause severe financial consequences and legal consequences such as garnishment of wages, and bad credit rating to defaulting individuals.
Bankruptcy and Insolvency Act, 1985
Persons declaring Bankruptcy are governed under the Bankruptcy and Insolvency Act, RSC 1985 (“BIA”).
The purpose of BIA is to provide a fresh start to honest debtors by discharging their liabilities, pre-existing their respective Bankruptcy.
However, the BIA also prevents individuals from taking advantage of the Bankruptcy system by absolving themselves of an obligation or a loan that will eventually enable them to earn income in the future. Student loans fall into this category, as the loan would theoretically enable a person availing an education to earn an income from his education in the future.
View of the Courts
Obtaining a post-secondary education is considered a long term asset as it will continue to generate income. The integrity of the Bankruptcyand Insolvency system would be undermined if the debtor were to retain the entire benefit of the asset without the creditors having a share. This was held in a decision of the Court of Queens Bench of AlbertaRe Dolgettaat para. 45 (2008 ABQB 556 Canlii).[1] This view is usually followed in cases where the debtor evades repaying the student loan, despite having received employment as a result of the education.
A Sympathetic Approach
However, Courts have in several cases, taken a sympathetic approach to student loan Bankruptcies, where students do not find work relating to their education or fail to complete the course. Conditional discharge orders are usually granted by Court, if it is established that the education has not been successful or will not otherwise benefit the bankrupt in the future. These conditional orders usually consist of directions to the debtor to repay the loan amount in the form of minimum monthly payments over a time period fixed by Court to a bankruptcy Trustee. A bankruptcy Trustee oversees the assets assigned by the bankrupt and ensures repayment of the debts to the creditors.
In cases of financial difficulty, the debtor will be permitted to make monthly payments of small sums over a period of time keeping in mind a reasonable lifestyle and surplus income of the debtor. The basic idea is to rotate government financial assistance by granting aid to aspiring students while ensuring repayment of student loans by students who have successfully completed their education.
An order of discharge
An order of discharge under the BIA releases the debtor from all provable claims of the creditors on payment of creditors. Discharge orders are passed by the Superior Court in Ontario. Discharge orders are either automatic or conditional.
The BIA stipulates that any debt or obligation relating to a student loan will not be released by an order discharge. An excerpt of Section 178 of the BIA states as follows:
178. (1) An order of discharge does not release the bankrupt from…
(g) any debt or obligation in respect of a loan made under the Canada Student Loans Act, the Canada Student Financial Assistance Actor any enactment of a province that provides for loans or guarantees of loans to students where the date of bankruptcy of the bankrupt occurred
(i) before the date on which the bankrupt ceased to be a full- or part-time student, as the case may be, under the applicable Act or enactment, or
(ii) Within seven years after the date on which the bankrupt ceased to be a full- or part-time student; or
(h) Any debt for interest owed in relation to an amount referred to in any of paragraphs (a) to (g).
(1.1) At any time after five years after a bankrupt who has a debt referred to in paragraph (1)(g) ceases to be a full- or part-time student, as the case may be, under the applicable Act or enactment, the court may, on application, order that subsection (1) does not apply to the debt if the court is satisfied that
(a) The bankrupt has acted in good faith in connection with the bankrupt’s liabilities under the debt; and
(b) the bankrupt has and will continue to experience financial difficulty to such an extent that the bankrupt will be unable to pay the debt.
Therefore, in relation to a debt or obligation relating to a student loan, the factors to be considered are
The date of the bankruptcy
The time when the bankrupt ceased to be a full-time /part-time student
Also, the Court may consider an application for discharge made by a bankrupt 5 years after ceasing to be a full-time/ part-time student if it is demonstrated that
The debtor has acted in good faith towards repayment of the loan and
The debtor will continue to face financial difficulty so as to be unable to repay the debt
Student Loans within Bankruptcies are complex, and an individual should not rely on lay advice or information. It is highly advisable to tread cautiously when an individual debtor of a student loan, is considering a Consumer Proposal or a Bankruptcy. Trustees can provide information, advice and options.
Contact Rumanek & Company Ltd. for more information on bankruptcy and debt solutions. Or please fill out the free bankruptcy evaluation form. To learn more please visit our YouTube Channel. Rumanek & Company have been helping individuals and families overcome debt for more than 25 years.
DISCLAIMER: THIS ARTICLE IS ONLY FOR INFORMATIONAL PURPOSES ON THE GENERAL APPLICATION OF BANKRUPTCY LAW. THIS ARTICLE IS NOT MEANT TO BE LEGAL ADVICE AND SHOULD NOT BE TREATED AS SUCH. Please contact a licensed bankruptcy trustee or a licensed bankruptcy lawyer in Ontario for any advice.
What is Bankruptcy? Learn more below or go to our YouTube channel.
A person legally declares themselves or their business unable to pay outstanding debts. Depending upon the type of bankruptcy filed, a debtor meets with a judge to determine a payment schedule, or have a legal bankruptcy discharge most debts. Businesses may also declare bankruptcy which either means the business will close or the business will continue to operate with reduced payments to debtors.
Act of Bankruptcy is an act committed by a debtor as defined under the Bankruptcy and Insolvency Act. One of the most common is if a debtor ceases to meet his liabilities generally as they become due. A creditor with a minimum claim of $1000 may file a petition for a receiving order if the debtor has committed such an act within the six months preceding the filing of the petition.
Contact Rumanek & Company Ltd. for more information on bankruptcy and debt solutions. Or please fill out the free bankruptcy evaluation form. To learn more please visit our YouTube Channel. Rumanek & Company have been helping individuals and families overcome debt for more than 25 years.
