Are you struggling with debt and feeling overwhelmed by financial stress? Consumer credit counseling might seem like the answer, but recent government investigations reveal that some debt advisory services may cost you more than they save.
As a Licensed Insolvency Trustee serving Toronto, Mississauga, Brampton, and Markham for decades, I’ve helped many people in the Greater Toronto Area navigate their debt challenges. In this comprehensive guide, I’ll explain what consumer credit counselling really offers, how to find legitimate help, and what alternatives might be better suited to your situation.
Financial difficulties affect millions of Canadians every year. The stress of mounting bills, collection calls, and uncertain futures can feel overwhelming. Consumer credit counseling presents itself as a solution, but understanding what it truly offers is crucial for making informed decisions about your financial future.
What is Consumer Credit Counseling?
Consumer credit counseling involves working with a certified credit counselor to address your debt problems. These services typically include:
Reviewing your complete financial situation
Creating personalized budgets and payment plans
Providing financial education and money management skills
Negotiating with creditors on your behalf
Offering ongoing support throughout your debt repayment journey
The goal is to help you regain control of your finances while avoiding more drastic measures like bankruptcy.
Who Can Benefit from Consumer Credit Counseling?
Consumer credit counseling can be helpful for people who:
Have steady income but struggle to manage multiple debts
Want to learn better budgeting and money management skills
Feel overwhelmed by financial decisions
Need help negotiating with creditors
Want to avoid bankruptcy or consumer proposals
However, consumer credit counseling isn’t right for everyone. If your debt is too high relative to your income, or if you’re facing immediate legal action from creditors, other debt relief options might be more appropriate.
The Empathetic Approach to Debt Relief and Financial Wellness
Legitimate consumer credit counseling recognizes that financial problems often involve more than just money. Good credit counselors understand the emotional stress of debt and provide compassionate, judgment-free support.
What empathetic counseling includes:
Active listening without blame or shame
Personalized solutions that fit your unique situation
Emotional support during difficult financial decisions
Education that empowers rather than overwhelms
Realistic timelines that consider your circumstances
The Foundation of Financial Recovery: What is Consumer Credit Counseling?
Understanding the fundamentals of consumer credit counseling helps you make informed decisions about whether it’s right for your situation.
Defining Consumer Credit Counseling
Consumer credit counseling is a service that helps people manage debt through education, budgeting assistance, and debt management plans. Legitimate consumer credit counseling agencies are typically non-profit organizations that charge minimal fees or offer free services.
Core components include:
Financial assessment and budget analysis
Debt management plan creation
Creditor communication and negotiation
Financial education and skill building
Ongoing support and monitoring
The Role of a Credit Counsellor: Your Trusted Financial Advisor
Initial Debt Evaluation: A Holistic Review of Your Financial Situation
The first step in consumer credit counseling involves a comprehensive review of your finances. This should include:
Complete debt inventory: All credit cards, loans, and other obligations
Income analysis: All sources of regular income
Expense review: Fixed and variable monthly expenses
Asset assessment: Property, investments, and valuable possessions
Credit report review: Understanding your credit history and score
This evaluation helps determine whether credit counseling is appropriate or if other debt relief options would work better.
consumer credit counseling
Why Choose Consumer Credit Counseling? Beyond Just Paying Off Debt
Credit counseling offers benefits that extend beyond simple debt repayment, addressing the root causes of financial stress.
Alleviating Financial Stress and Improving Mental Health
Financial problems create significant stress that affects your entire life. Quality credit counseling helps by:
Providing clarity about your financial situation
Creating realistic plans that reduce anxiety about the future
Offering emotional support during difficult times
Teaching coping strategies for financial stress
Restoring hope that your situation can improve
Studies show that people who complete credit counseling programs report significant improvements in their mental health and overall well-being.
Gaining Control Over Your Finances and Achieving Financial Freedom
Credit counseling helps you develop skills and habits that lead to long-term financial stability:
Better budgeting skills that prevent future debt problems
Improved money management through practical tools and techniques
Understanding of credit and how to use it responsibly
Emergency planning to handle unexpected expenses
Goal setting for future financial objectives
Receiving Personalized Financial Education and Budgeting Guidance
One of the most valuable aspects of consumer credit counseling is the education component. You’ll learn:
How to create and stick to realistic budgets
Strategies for reducing expenses without sacrificing quality of life
How to prioritize debt payments for maximum impact
Ways to increase income through career development
Long-term financial planning techniques
Stopping Collection Calls and Protecting Your Consumer Rights
When you enter a debt management plan through consumer credit counseling, creditors typically agree to stop collection activities. This provides immediate relief from:
Constant phone calls and letters
Threats of legal action
Stress and anxiety from creditor harassment
Confusion about your rights as a debtor
However, it’s important to understand that this protection isn’t automatic and depends on creditor cooperation.
Your Path to Financial Stability: The Step-by-Step Credit Counseling Process
Understanding what to expect from consumer credit counseling helps you prepare for success and identify quality services.
Step 1: The Confidential Debt Evaluation and Budget Counseling Session
Your first meeting with a credit counselor should be comprehensive and confidential. During this session:
Complete financial review: Every debt, income source, and expense
Credit report analysis: Understanding your current credit standing
Budget creation: Realistic monthly spending plan
Option exploration: All available debt relief strategies
Initial recommendations: Preliminary advice based on your situation
Important: This initial consultation should be free or very low cost (under $50).
Step 2: Crafting Your Personalized Debt Management Plan (DMP)
If a debt management plan is appropriate for your situation, your counselor will:
Calculate affordable payments based on your budget
Contact creditors to negotiate terms and interest rates
Consolidate payments into one monthly amount
Set realistic timelines for becoming debt-free
Explain all terms clearly before you commit
Key point: You should never feel pressured to sign up immediately. Take time to review and understand all terms.
Step 3: Communication and Advocacy with Creditors
Your credit counselor will serve as your advocate with creditors, working to:
Negotiate lower interest rates (often 0-10% instead of 18-25%)
Waive late fees and penalties that have accumulated
Stop collection activities during plan participation
Establish reasonable payment terms you can actually afford
Provide regular updates on your progress
Step 4: Ongoing Support, Financial Education, and Achieving Debt Free Status
Throughout your debt management plan, quality credit counseling includes:
Regular check-ins to monitor progress and address challenges
Continued education through workshops and resources
Budget adjustments when your circumstances change
Credit rebuilding guidance as you approach debt freedom
Graduation planning for maintaining financial health after completion
Most debt management plans take 3-5 years to complete, with many people becoming debt-free faster through improved financial habits.
consumer credit counseling
Debt Management Plans (DMPs) Explained: Key Benefits and Considerations
Debt management plans are the primary tool used in credit counseling, but they’re not right for everyone.
What Types of Debts are Included in a DMP?
Debt management plans typically include all unsecured debt:
Credit cards (all major issuers usually participate)
Store credit cards and retail financing
Personal loans from banks and credit unions
Medical debt and professional service bills
Some collection accounts (depending on the creditor)
Debts usually NOT included:
Secured debts (mortgages, car loans)
Government debts (taxes, student loans)
Court judgments and garnishments
Debt to family and friends
How DMPs Can Offer Interest Relief and Lower Monthly Payments
The primary benefits of debt management plans include:
Reduced interest rates: Often lowered to 0-10%
Waived fees: Late charges and over-limit fees eliminated
Single payment: One monthly payment instead of multiple bills
Fixed timeline: Clear end date for becoming debt-free
Example: Sarah owed $25,000 on five credit cards with an average interest rate of 22%. Through a DMP, her rate dropped to 8%, reducing her monthly payment from $890 to $520 and cutting three years off her repayment time.
The Impact of a DMP on Your Credit Score: Myth vs. Reality
There are many misconceptions about how debt management plans affect credit scores:
Myths:
“DMPs destroy your credit score”
“It’s as bad as bankruptcy on your credit report”
“You can’t get credit while on a DMP”
Reality:
DMPs may initially lower your score by 50-100 points
Your score typically recovers within 12-18 months
The impact is much less severe than bankruptcy or debt settlement
Many people see improved scores as they pay down debt
You can often qualify for new credit after 12 months of on-time payments
Comparing Your Options: Credit Counseling vs. Other Debt Relief Solutions
Understanding all your options helps you make the best choice for your specific situation.
Credit Counseling vs. Debt Consolidation Loans
Credit Counseling:
No new loan required
Works with existing creditors
Provides education and support
Minimal fees (usually under $100)
Available even with poor credit
Debt Consolidation Loans:
Requires qualifying for a new loan
May offer lower interest rates
No ongoing support or education
Higher fees (origination fees, interest)
Difficult to qualify with damaged credit
Best for: Credit counseling works better if you can’t qualify for a low-interest consolidation loan or need ongoing support.
Unfortunately, not all debt advisory services have your best interests in mind. Recent government investigations have revealed serious problems in Canada’s debt advisory marketplace.
Government Investigation Reveals Serious Issues
In December 2023, Canada’s Office of the Superintendent of Bankruptcy (OSB) released a position paper on The Adverse Effects of the Debt Advisory Marketplace on the Insolvency System. This position paper detailed the environment of problematic debt advisory practices. Since then, over 100 complaints have been filed against debt advisors.
Major problems identified:
Charging fees for services that should be free
Misrepresenting themselves as government officials
Requiring upfront payments before providing help
Threatening to cancel debt solutions if clients stop paying
The Hidden Costs of Questionable Debt Advisors
The financial impact has been significant. Between December 2023 and April 2025:
Debt advisor involvement in bankruptcy cases dropped 59%
Monthly fees paid to advisors fell from $2.1 million to $1.2 million
This represents nearly $1 million monthly in unnecessary fees paid by struggling Canadians
Real example: One client was instructed to put debt advisor fees on credit cards, then include that new debt in their bankruptcy filing – a practice that may violate Canadian criminal law.
Red Flags to Watch For
Immediate warning signs:
Demands for large upfront payments
Claims they work “with the government”
Promises to “eliminate your debt” quickly
High-pressure sales tactics
Won’t provide clear fee information
Prevents direct communication with Licensed Insolvency Trustees
Common misleading tactics:
“You must pay us first” – False. You can contact Licensed Insolvency Trustees directly.
“We can get better deals than trustees” – Trustees have legal authority that debt advisors don’t have.
“Pay us or your proposal will fail” – Often a scare tactic without legal basis.
Finding Legitimate Consumer Credit Counseling Help
How to Identify Quality Credit Counseling Services
Look for these characteristics:
Non-profit status or transparent fee structure
Accreditation from recognized organizations
Free or low-cost initial consultations
Educational focus, not just debt management
Clear explanations of all options, not just their services
Willingness to refer you elsewhere if appropriate
Questions to Ask Any Credit Counseling Agency
Before committing to any service, ask:
“What are all your fees, and when do I pay them?”
“Are you accredited, and by whom?”
“What happens if I can’t make my payments?”
“How will this affect my credit score?”
“Can you provide references from past clients?”
“What other debt relief options should I consider?”
Maintain strict professional and ethical standards
Provide legal protection through bankruptcy and consumer proposal processes
Full Disclosure: Ira Smith Trustee & Receiver Inc. operates independently and has no relationships with unregulated debt advisory services.
consumer credit counseling
My Professional Experience and Qualifications
As a Licensed Insolvency Trustee serving the Greater Toronto Area for decades, I’ve helped thousands of individuals and families overcome financial challenges. My approach combines legal expertise with a genuine understanding of the emotional stress that debt creates.
Former senior banker with extensive credit and lending experience
Regular community education contributor on financial topics
Maintaining my continuing education in debt advisory and financial restructuring matters
My commitment: Every client receives honest, transparent advice tailored to their unique situation. I believe in empowering people with knowledge and supporting them through the recovery process.
Frequently Asked Questions About Consumer Credit Counseling
Q: Will consumer credit counseling hurt my credit score?
A: Quality credit counseling may initially lower your score by 50-100 points, but this recovers within 12-18 months as you pay down debt. The impact is much less severe than bankruptcy, debt settlement, or continuing to miss payments.
Q: How much does legitimate consumer credit counseling cost?
A: Non-profit credit counseling typically charges $20-50 for initial setup and $20-40 monthly for debt management plans. Be very wary of services charging hundreds or thousands of dollars upfront.
Q: Can I get out of a debt management plan if my situation changes?
A: Yes, you can exit a DMP at any time. However, creditors may reinstate original interest rates and fees. Discuss exit strategies with your counsellor, before starting.
Q: Will my creditors definitely agree to a debt management plan?
A: Most major credit card companies participate in DMPs, but participation is voluntary. Your counselor should be upfront about which creditors typically cooperate.
Q: Is consumer credit counseling better than bankruptcy?
A: It depends on your situation. Credit counseling works well if you have steady income and manageable debt levels. Bankruptcy might be better if your debt is too high relative to income or you’re facing immediate legal action.
consumer credit counseling
Taking Action: Your Next Steps Toward Financial Recovery
If You’re Considering Consumer Credit Counseling
Research thoroughly – Look for accredited, non-profit agencies
Get multiple consultations – Compare approaches and fees
Ask detailed questions – Understand exactly what you’re paying for
Review alternatives – Make sure counsellingcounsellor is your best option
Start with free resources – Many educational materials are available at no cost
If You Think You Need More Comprehensive Help
Sometimes consumer credit counseling isn’t enough. You might benefit from legal debt relief options like consumer proposals or bankruptcy if:
Your debt exceeds 40% of your gross annual income
You’re only making minimum payments with no progress
Creditors are threatening legal action
You’re using credit to pay for necessities
Financial stress is severely impacting your health or relationships
Free Consultation Available
If you’re dealing with overwhelming debt in the Greater Toronto Area, I invite you to book a free, no-obligation consultation with me. During our meeting, we’ll:
Complete review of your debt and financial situation
Explanation of how different solutions might affect your credit
Discussion of immediate steps you can take
Honest assessment of whether consumer credit counseling or other options are best for you
Clear answers to all your questions in a counselling language you understand
What makes my approach different:
We have years of experience with Canadian debt relief
Legal authority to implement solutions that debt advisors cannot
Regulated fees with no hidden costs
Genuine commitment to your long-term financial health
Comprehensive support throughout your recovery process
Conclusion: Making Informed Decisions About Consumer Credit Counseling
Consumer credit counseling can be a valuable tool for debt relief, but only when you choose the right service provider and understand all your options. The key is distinguishing between legitimate, educational counselling services and expensive programs that duplicate services available elsewhere for free.
Remember these crucial points:
Quality consumer credit counseling focuses on education and empowerment
Non-profit agencies typically offer the most trustworthy services
Be extremely cautious of high upfront fees or pressure tactics
Your current financial situation doesn’t define your future possibilities
Whether you choose credit counseling, work with a Licensed Insolvency Trustee, or pursue other debt relief options, the most important step is taking action. Financial problems rarely improve on their own, but with the right guidance and commitment, you can overcome debt challenges and build lasting financial stability.
The path to financial freedom in Canada’s current economic climate may be challenging, but it is not impossible. With the right information, a clear plan, and professional guidance, you can overcome your cost of living and debt challenges and move towards a more secure and hopeful financial future.
You’re not alone in this. There’s a path forward, and it starts with reaching out for the right kind of help. Take that step—you deserve it. If you’re a GTA resident dealing with overwhelming debt, don’t wait for your credit situation to get worse. As a licensed insolvency trustee serving Toronto, Mississauga, Brampton, Vaughan, Markham, and surrounding areas, I’m here to help you understand your options.
Remember: Your current financial situation doesn’t define your future. With the right help and information, you can overcome both debt challenges and credit score problems.
As a licensed insolvency trustee serving the Greater Toronto Area, I encourage consumers and business owners to view financial difficulties not as failures but as challenges that can be addressed with proper guidance. By understanding the warning signs of insolvency and seeking professional advice early, many people and businesses can find a path forward – whether through restructuring, strategic changes, or in some cases, an orderly wind-down that protects their future opportunities.
Remember: The earlier you seek help for company insolvency concerns, the more options you’ll have.
If you or someone you know is struggling with too much debt, remember that the financial restructuring process, while complex, offers viable solutions with the right guidance. As a licensed insolvency trustee serving the Greater Toronto Area, I help entrepreneurs understand their options and find a path forward during financial challenges.
At the Ira Smith Team, we understand the financial and emotional components of debt struggles. We’ve seen how traditional approaches often fall short in today’s economic environment, so we focus on modern debt relief options that can help you avoid bankruptcy while still achieving financial freedom.
The stress of financial challenges can be overwhelming. We take the time to understand your unique situation and develop customized strategies that address both your financial needs and emotional well-being. There’s no “one-size-fits-all” approach here—your financial solution should be as unique as the challenges you’re facing.
If any of this sounds familiar and you’re serious about finding a solution, reach out to the Ira Smith Trustee & Receiver Inc. team today for a free consultation. Ira Smith Trustee & Receiver Inc. is a Licensed Insolvency Trustee serving Toronto, Vaughan, Mississauga, Brampton, Markham, and the entire Greater Toronto Area. We’re committed to helping you or your company get back on the road to healthy, stress-free operations and recover from financial difficulties. Starting Over, Starting Now.
The information provided in this blog is intended for educational purposes only. It is not intended to constitute legal, financial, or professional advice. Readers are encouraged to seek professional advice regarding their specific situations. The content should not be relied upon as a substitute for professional guidance or consultation. The author, Ira Smith Trustee & Receiver Inc., and any contributors do not assume any liability for any loss or damage.
Debt consolidation loans in Canada can be an excellent means to conserve money and get your funds in order. By combining several financial obligations into an affordable single loan, you can frequently get a lower rate of interest and also reduced month-to-month payments. This can assist you to get out of debt quicker as well as save cash over time.
Prior to getting debt consolidation loans in Canada, it is very important to understand the terms of the financing and also to make sure you can afford the monthly payments. It’s also a good idea to look around and compare rates of interest and also loan terms from various financial institutions.
In this Brandon’s Blog, I discuss the concept of debt consolidation loans in Canada and a sort of new potential lender offering personal loans in Canada. I will also share another debt settlement and debt consolidation option that may be beneficial for people and companies who want to repair their financial situation.
Advantages as well as downsides of consolidation loans in Canada
Upsides
Debt consolidation loans in Canada can offer many benefits over making regular monthly payments on many different loans and debts with different interest rates. Interest rates on some debts, like credit card debt, can be categorized as high-interest debts, making it difficult to make a dent in the balance owing. if all you ever do is make the monthly minimum payment.
Consolidation loans supply a number of advantages, such as:
Reduced interest rates – Lenders normally give consumers reduced rates of interest on individual personal loans allowing them to repay their high-interest-rate credit card debt. Consolidation loans in Canada can be an excellent method to obtain a lower rate of interest and come to be debt-free quicker.
Reduce your monthly payments – Banks and credit unions usually offer debt consolidation loans in Canada with terms of up to 5 years. This, along with the lower interest rate, can help you save a lot of money in the long run and give you a lower monthly payment than the sum of the monthly payments required under your many debts.
A single payment instead of multiple payments – One of the best things about debt consolidation loans in Canada is that you only have to make one monthly payment. This makes it much easier to budget and stick to your plan. Instead of having to remember to pay six different bills each month, you only have to worry about one.
Potentially improved credit scores – Your credit report is a number that banks make use of to determine your creditworthiness. A high credit rating suggests you are a low-risk borrower, which is excellent. A bad credit rating indicates you are high-risk, which is bad.
By obtaining a debt consolidation loan, making on-time payments and paying it off on time without a payment schedule default or late payments, you are restoring your bad credit score in 2 ways. First, you have revealed that you had the ability to fully settle all of your other financial debts. Second, you are repairing your credit score by making the consolidation loan payments on time. It is not instant, yet in time, paying off debt consolidation loans in Canada will certainly improve your credit rating. Over time, you will see your credit score and credit report improve.
Downsides
There are a few downsides to debt consolidation loans in Canada, including:
Debt consolidation loans in Canada are often referred to as “easy money.” But they aren’t always easy. Even though many consumers think they qualify for a loan based solely on their disposable income, there are certain circumstances where Canadian banks will not see your monthly income in as good a light as you do. You will need collateral such as real estate, cars, boats, etc.
If you do not have these things, you may be at a disadvantage. Most banks will not lend money to someone with a low credit score unless they have some form of security, such as a car or house with enough equity. This makes sense because the lender knows that it is a debt consolidation loan you are applying for and by definition, you cannot pay off your credit card balances without their loan. They will want to protect themselves against the chance you may default on the loan.
When choosing a bank, you’ll want to compare fees, interest rates and prepayment penalties to ensure you’re getting the best deal. Keep in mind that the lowest fees don’t always mean the best overall value, so be sure to compare all aspects of the loan before making a decision. You might even consider getting one of the types of secured loans by raising money against your home through a home equity line of credit or a second mortgage. So compare your offers of secured loans and unsecured debt consolidation loans in Canada very carefully to consider all factors in deciding which is best for you.
WARNING: Stay away from private lenders, payday lenders and most alternative lenders who may provide loans just as expensive as payday loans. Their fees and high-interest loans will never be in your favour.
Consolidation loans in Canada: Can you consolidate student loan debt?
Students and recent graduates who find themselves buried under student loan debt often look for help. They want to consolidate their debts into one manageable monthly payment, but this can be difficult to obtain because there are few debt consolidation loans specifically designed for them.
Many recent graduates lack the credit history or income to qualify for a consolidation loan. They also generally do not have any free assets to qualify for a single secured debt consolidation loan to pay out over a longer period of time at a lower interest rate.
Unsecured loans to young people with a little credit history will be more expensive than one to an individual with a long-established credit history. That assumes that they can even qualify for this type of loan.
For these reasons, other than perhaps for a recent graduate from either medicine or dentistry who perhaps can roll their student debt into a professional loan, it will be very difficult to get consolidation loans in Canada to consolidate student debt.
Consolidation loans in Canada: Can going postal help you reach your financial goals?
Here is a potential new source for debt consolidation loans in Canada. Although it was not set up specifically for consolidation loans, there is no reason why you cannot use the money for that purpose if you are approved.
There is a new loan program offered by Canada Post which is designed to help people who are struggling financially, especially in rural areas where access to banking institutions is limited. It is called the Canada Post MyMoney™ Loan product. The idea is that you get a loan that’s based on how much you can afford to pay back, what you need the money for, and how likely you are to repay it.
The initiative is part of Canada Post’s commitment to helping Canadians manage their finances better. Their goal is to provide easy access to financial services and products that can help people save time and money.
To have your loan application considered, you have to be either a Canadian citizen or a Permanent Resident. You must be no younger than 18 years of age and you need to have annual earnings of a minimum of $1,000. Additionally, you need to not have been bankrupt within the 2 years before applying for the loan or had any of your financial debts handed off to a collection agency within the year before applying. They will of course also do a credit check on you.
In order to receive your loan proceeds, you must have a chequing or interest-bearing account with a Canadian financial institution in your own name. Borrowers of MyMoney™ loans are not required to offer any security against assets, in contrast to secured loans from banks and credit unions. Instead, applicants need only provide proof of identity, employment history and income. Both variable and fixed-rate installment loans are offered. The actual lender is TD Bank.
Consolidation loans in Canada: Other financial debt loan consolidation choices
You may not want to take on more debt to pay off your current debt. I don’t blame you and I get it. Or you may have been denied a debt consolidation loan. Here are some other options for consolidating your debt:
Balance Transfer Credit Cards
A balance transfer is simply when you move the balance of one credit card over to another credit card. For example, if you have a balance of $5,000 on your Mastercard, you can transfer that balance to a new Visa account that offers you 0% interest for 1 year on all balance transfers.
When you switch, you won’t have to pay interest charges for 12 months. After that, you’ll need to pay off the balance in full or start making payments on the balance transferred. Of course, you’ll still accrue interest after the interest-free period on the remaining balance.
Consolidation loans in Canada: Credit counselling
Credit counselling is a service that helps individuals to manage their finances and improve their financial situation. It can be done with a range of techniques, including budgeting, negotiating with creditors, setting up a plan to repay debt and monitoring actual behaviour vs. the plan.
Credit counselling can be an excellent way for individuals to take control of their financial obligations. It can help them create a plan to settle their debt, and provide them with the tools and knowledge they need to maintain financial literacy in the future.
There are many different credit counselling services available to choose from. You should select a community-based service to avoid being charged any fees. Be sure to stay away from any counselling service that charges fees, as this will only add to your expenses when trying to reduce debt.
Consolidation loans in Canada: Debt help is available with a financial restructuring program
Financial restructuring is a complicated and difficult procedure, however, it likewise provides individuals as well as businesses with a new beginning and a brand-new lease on life. Selecting to reorganize your finances with the help of a licensed insolvency trustee will certainly have temporary challenges, but can ultimately provide you with financial relief and a fresh start.
If you are considering financial restructuring, we urge you to consult with a licensed insolvency trustee to discuss your options. We can help you understand all of your options and work with you to develop a plan that is in your best interests.
Trustees are experienced in all aspects of financial restructuring and can supply you with the information and assistance you require to make the very best decision for your situation.
The most well-known financial restructuring tool for individuals is the consumer proposal. For mid-size companies and individuals with larger debt, it is a Division I proposal. For companies with debts greater than $5 million, restructuring is accomplished through the use of the Companies’ Creditors Arrangement Act.
Here is the best part. You should consider financial restructuring as getting an interest-free loan to pay off all your debts for a fraction of what you owe. I am qualified and experienced in all forms of financial restructuring, can explain this concept to you and am always available to answer any of your questions.
Consolidation loans in Canada: Before making a decision on your financial life needs – Call me
I hope that you found this consolidation loans in Canada Brandon’s Blog informative. If you’re sick and tired of carrying the burden of debt and ready to live a much better life, we can assist. We know exactly how it really feels to be in debt as well as feel like you’re never going to get ahead. We have actually helped lots of people and businesses that were in your position reach financial stability, so we understand it’s feasible for you to prosper in your objective of ending up being debt-free. Nevertheless, it will certainly require some work on your part. We’ll be right here to assist you with every action necessary.
The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too many personal unsecured debts,Credit card debt, income tax debt liability, unsecured loans or personal obligations from the running of your company or from being a business owner. These are all types of debt we can help you eliminate. We are aware of your financial difficulties and understand your concerns. Filing bankruptcy is the last option we explore only after we have exhausted all other options to avoid bankruptcy, such as financial restructuring through a debt repayment plan.
It is not your fault that you are in this situation. You have been only shown the old ways that do not work anymore. The Ira Smith Team uses new modern ways to give you the best management advice to get you out of your outstanding debt troubles while avoiding bankruptcy. We can get you debt relief freedom.
The stress placed upon you is huge. We understand your pain points. We are sympathetic to the financial difficulties you are experiencing and would like to help alleviate your concerns. We want to lighten your load by coming up with a debt settlement plan crafted just for you.
We realize that people and businesses in financial difficulty need practical advice and a workable solution in an easy-to-understand financial plan. The Ira Smith Team knows that not everyone has to file for bankruptcy in Canada. Most of our clients never do, as we are familiar with alternatives to bankruptcy. We assist many people in finding the relief they need.
Call or email us. We would be happy to give you a no-cost initial consultation. We can find you the perfect solution to tailor a new debt restructuring procedure specifically for you, based on your unique economic situation and needs. We provide a full range of services to people and companies. If any of this sounds familiar to you and you’re serious about finding a solution, let us know. We will get you back to living a happy life, whether or not there is an economic recession in Canada.
As the COVID-19 pandemic continues, we hope that you, your family, and your friends are safe, healthy, and secure. Ira Smith Trustee & Receiver Inc. is fully operational, and both Ira and Brandon Smith are readily available for phone or video consultations.
Consumer proposal student loans: Student Loans and Consumer Proposals
In the event of student loan debt, you may be able to eliminate certain student loans through a bankruptcy or consumer proposals. Student loans are given special treatment under the Bankruptcy and Insolvency Act (Canada) (BIA). The seven-year waiting period is a requirement for consumer proposals related to student loans (by the way, the concept is similar in personal bankruptcy).
Throughout this Brandon Blog, when I refer to student loans, I am referring to loans issued under the Canada Student Loans Act, the Canada Student Financial Assistance Act, or any provincial act that provides loans or guarantees for student loans.
I am not talking about any loan debt not meeting this definition. A private loan or a loan from a financial institution that is not covered by the above-noted legislation would be examples, including other loans taken out for professional training.
Consumer proposal student loans: Filing a consumer proposal for student loan debt
In previous posts, I discussed consumer proposals and how they can be used as an alternative to bankruptcy and as a means to negotiate repayment terms of your entire debt with creditors. Canada’s only federally authorized debt settlement program is the consumer proposal. Only licensed insolvency trustees (formerly called bankruptcy trustee) can administer consumer proposal student loans or for any other kind of debt. By using consumer proposals, you can negotiate away the majority or all of your debt in return for making monthly payments for a fraction of that amount and over an extended period of time, not exceeding five years, without incurring any interest. The seven-year rule affects consumer proposal student loans under the student loan legislation.
When you submit a consumer proposal, one of the major benefits is a stay of proceedings, just as in bankruptcy. You will no longer be subject to collection efforts including collection calls, legal action and wage garnishments. Private or financial institution loans taken out while you were a student, not covered by student loan legislation, may be eliminated under the BIA without regard to the seven-year rule. Private student loan debt such as a line of credit or credit card debt incurred while you were a student would be examples.
consumer proposal student loans
Consumer proposal student loans: Think of insolvency waiting periods like a clock with a start date and an end date
In either personal bankruptcy or consumer proposals, student debt is treated differently under government student loan legislation than normal ordinary unsecured consumer debt. The 7-year waiting period is a mandatory waiting period set by the BIA. This is why it is so important.
Student loan debt relief under section 178(1)(g) of the BIA is not available to people who have filed for bankruptcy or a consumer proposal and have not yet ceased to be a full-time or part-time student or who are within 7 years of ceasing to be a full- or part-time student.
A consumer proposal or personal bankruptcy can be filed by insolvents after they stop being full-time or part-time students more than seven years after ceasing to be students. In that case, the student loans debt can either be discharged by bankruptcy or by consumer proposals.
Counting the 7 years may also not be as straightforward as it sounds. In most cases, students take out a series of loans for each year of college or university. Do the 7-year counts take place on a loan-by-loan basis individually, or is it treated collectively? If in doubt, group them together.
The person must consider all three aspects of the calculation in order to do the calculation correctly:
the date the personal bankruptcy or consumer proposal was filed;
When the insolvent person ceased to be a student;
After ceasing to be a full-time student or part-time student, the length of time the person must wait before a consumer proposal student loan compromises the debt or the loan is discharged through an absolute discharge from bankruptcy.
Consumer proposal student loans: Potential “Court-Ordered Discharge” under hardship provision where 5-year waiting period satisfied
Under section 178(1.1) of the BIA, there is a provision that only applies in bankruptcy. It does not apply for consumer proposal student loans. Since we are discussing student loan debt, I would be remiss if I did not mention it.
Under this section, the court can order that the 7-year waiting period does not apply to a bankrupt who has student loan debt under federal or provincial student loan legislation 5 years after ceasing to be a full-time or part-time student. It would then actually be only a five-year waiting period.
Only a five-year waiting period can be allowed by the court if these conditions are met:
the bankrupt acted in good faith in connection with its student loan debt; and
it is likely that the bankrupt will continue to face financial difficulties to such an extent that it is impossible for them to repay their student loan debts.
What does the compulsory waiting period entail? When should we choose between a 7-year and 5-year waiting period? The 7-year waiting period has already been discussed. In determining whether a bankrupt is entitled to the hardship reduction for the lower 5-Year waiting period, the court considers the following factors:
How was the money used? For the purpose, it was borrowed for?
Was the bankrupt honest in his or her attempt to complete the educational program?
Has the bankrupt gained employment in an area directly related to his or her education?
Did the bankrupt make reasonable efforts to make monthly payments or otherwise make student loan payments against the loan or did the bankrupt make an immediate assignment into bankruptcy?
Are there any repayment assistance programs options for student loan debt relief that the bankrupt can take advantage of concerning the outstanding student loans, such as interest relief or loan forgiveness and has the bankrupt applied for such repayment assistance programs?
Did the bankrupt overspend or behave irresponsibly with personal or family finances?
When the loan applications were made, was the person’s disclosure about his or her circumstances fair and accurate?
The court decisions on obtaining financial hardship relief show that it is not easily obtained. A bankrupt normally have to show that they have exhausted all efforts, their financial hardship is not a result of their actions or inaction and that their financial situation cannot reasonably be expected to improve without the undue hardship relief.
consumer proposal student loans
Consumer proposal student loans: Paying Student Loans During Your Bankruptcy or Consumer Proposal
What if:
Your financial circumstances are you have too many unsecured debts and your unsecured creditors are taking legal action against you?
You have a history of rolling over payday loans and are deep in financial trouble.
You have to go see one of the licensed insolvency trustees in your area and ultimately use one of the debt-relief tactics of bankruptcy or consumer proposal.
If you stopped being a student:
5 or 6 years ago but you know that you could not qualify for the financial hardship provision relief; or
the last time you went to school was less than 5 years ago; and
you need to start repaying your student loans.
To rebuild a solid foundation for a good financial future in such a situation, either bankruptcy or a consumer proposal would have to be filed. Despite the fact that you would not be able to eliminate or compromise your student loans, you would be able to escape the clutches of your otherwise crushing other unsecured debts.
In such a case, it may make sense to file for an insolvency process, even though you would be paying student loans during your bankruptcy or consumer proposal.
Consumer proposal student loans summary
I hope you found this consumer proposal student loans Brandon Blog informative. Are you or your company in financial distress and a debt crisis? Are you embroiled in costly litigation or a crushing debt load and need a time out in order to restructure? Do you not have adequate funds to pay your financial obligations as they come due? Are you worried about what will happen to you in retirement? Do you need to find out what your debt relief options and realistic debt relief solutions for your family debt are? Is your company in financial hot water?
Call the Ira Smith Team today. We have decades and generations of experience assisting people looking for life-changing debt solutions through a debt settlement plan and AVOID the bankruptcy process.
As licensed insolvency professionals, we are the only people accredited, acknowledged and supervised by the federal government to provide insolvency advice and to implement approaches to help you remain out of personal bankruptcy while eliminating your debts. A consumer proposal is a government-approved debt settlement plan to do that. It is an alternative to bankruptcy. We will help you decide on what is best for you between a consumer proposal vs bankruptcy.
Call the Ira Smith Team today so you can eliminate the stress, anxiety, and pain from your life that your financial problems have caused. With the one-of-a-kind roadmap, we develop just for you, we will immediately return you right into a healthy and balanced problem-free life.
You can have a no-cost analysis so we can help you fix your troubles.
Call the Ira Smith Team today. This will allow you to go back to a new healthy and balanced life, Starting Over Starting Now.
As the COVID-19 pandemic continues, we hope that you, your family, and your friends are safe, healthy, and secure. Ira Smith Trustee & Receiver Inc. is fully operational, and both Ira and Brandon Smith are readily available for phone or video consultations.
The Ira Smith Team is absolutely operational and both Ira, as well as Brandon Smith, are right here for a telephone appointment, conference calls and also virtual meetings.
Stay healthy and safe everybody.
If you would rather listen to the audio version of this Brandon’s Blog, please scroll down to the bottom and click on the podcast
Introduction
For plenty of students, the month of May generally marks the beginning of a summertime job. But now, due to the COVID-19 pandemic, it might be actually challenging for them to get any kind of work. They could have already been trying for weeks to find a job without any success. The purpose of this Brandon’s Blog is to describe what the Canadian government is doing to help students in general, and especially those with a Canada student loan.
“Banks were once places to hold money and were very careful in lending to finance families as they built a future – bought homes, bought cars, took out student loans.” – Elizabeth Warren
Government of Canada student loan program announcement
Prime Minister Justin Trudeau revealed comprehensive assistance of close to $9 billion for post-secondary students and also recent graduates. The plan was developed to give assistance to students for the financial backing they need this summer, help them proceed with their research studies in the fall, and help them get the experience they require to start their jobs.
These measures consist of:
the Canada Emergency Student Benefit, which gives assistance to students as well as new graduates that are not eligible for the Canada Emergency Response Benefit. This benefit gives $1,250 monthly for qualified students or $1,750 each month for qualified students with dependents or disabilities. The benefit would be offered from May to August 2020.
the new Canada Student Service Grant, which will help students gain useful job experience and also skills while they help their communities throughout the COVID‑19 pandemic. For students that pick to do serve their community, this new program will offer as much as $5,000 for their 2020-21 education.
On March 30, 2020, the Government of Canada also announced a six-month interest-free moratorium on the repayment of any Canada student loan for all people that are in the process of paying off their student debt. To reassure the student loan borrowers, the government went on to say that all pre-authorized debits taking payments automatically out of people’s accounts will stop.
This will certainly provide interest and payment relief to virtually 1 million Canada student loan borrowers. This delaying payment date of September 1, 2020 ties into the same moratorium given on other types of payments for both Canadian business and individual taxpayers.
“I think my mom and dad both wanted to get across to me that… I obviously grew up with great privilege and was very lucky and was able to afford college and not have student loans, and they would pay for college, but beyond that, it would be up to me to make a living.” – Anderson Cooper
Summer jobs for 2020
The federal government is developing 76,000 work for students in addition to the Canada Summer Jobs program. These placements will be in industries that need an additional hand today or that are on the cutting edge of this pandemic.
“I am just one of the overwhelming majority of Americans who is responsible and hard-working and at one point in their life benefited greatly from government programs such as student loans, Medicare, and Social Security.” – Tammy Duckworth
Fall 2020 to 2021 assistance for post-secondary students
Adjustments to the Canada student loan program have also been done so students facing financial difficulties from COVID-19 can access and manage post-secondary education. Pending federal government authorization, the new measures will come into force on August 1, 2020, for students for a one year period. The Canada Student Service Grant will help those who would rather volunteer and serve their neighbours and country during this health crisis.
These changes include:
Doubling of the student grants for all eligible full-time students to up to $6,000 and for part-time students up to $3,600 in 2020-21. The Canada student grants for students with long-term disabilities and students with dependents will also be doubled.
Widen eligibility for student financial assistance by getting rid of the expected student’s and spouse’s payments in 2020-21, given there will be struggles saving for university for next year.
Boost the program by raising the maximum amount that can be provided weekly to a student in 2020-21 from $210 to $350.
Extra support for First Nations, Inuit, and Métis students going after post-secondary education by giving an additional $75.2 million in 2020-21.
Extend ending government graduate research scholarships and postdoctoral fellowships, and supplement existing federal research study funding, to support students and postdoctoral fellows, by supplying $291.6 million to the government approval councils. Furthermore, the government wants to boost work opportunities for graduate students and postdoctoral fellows via the National Research Council of Canada.
“I would get my student loans, get money, register and never really go. It was a system I thought would somehow pan out.” – Ray Romano
Summary
The Ira Smith Team family hopes that you and your family members are remaining secure, healthy and well-balanced. Our hearts go out to every person that has been affected either via misfortune or inconvenience.
We all must help each other to stop the spread of the coronavirus. Social distancing and self-quarantining are sacrifices that are not optional. Families are literally separated from each other. We look forward to the time when life can return to something near to typical and we can all be together once again.
Ira Smith Trustee & Receiver Inc. has constantly used clean, safe and secure ways in our professional firm and we continue to do so.
Revenue and cash flow shortages are critical issues facing entrepreneurs and their companies and businesses.
If anyone needs our assistance, or you just need some answers for questions that are bothering you, feel confident that Ira or Brandon can still assist you. Telephone consultations and/or virtual conferences are readily available for anyone feeling the need to discuss their personal or company situation.
Are you now worried just how you or your business are going to survive? Those concerns are obviously on your mind. This pandemic situation has made everyone scared.
The Ira Smith Team understands these concerns. More significantly, we know the requirements of the business owner or the individual that has way too much financial debt. You are trying to manage these difficult financial problems and you are understandably anxious.
It is not your fault you can’t fix this problem on your own. The pandemic has thrown everyone a curveball. We have not been trained to deal with this. You have only been taught the old ways. The old ways do not work anymore. The Ira Smith Team makes use of new contemporary ways to get you out of your debt problems while avoiding bankruptcy. We can get you debt relief now.
We look at your whole circumstance and design a strategy that is as distinct as you are. We take the load off of your shoulders as part of the debt settlement strategy we will draft just for you.
We understand that people facing money problems require a lifeline. That is why we can establish a restructuring procedure for you and end the discomfort you feel.
Call us now for a no-cost consultation. We will listen to the unique issues facing you and provide you with practical and actionable ideas you can implement right away to end the pain points in your life, Starting Over, Starting Now.
“Bankruptcy laws allow companies to smoothly reorganize, but not college graduates burdened by student loans.” – Robert Reich
The Ira Smith Team is absolutely operational and both Ira, as well as Brandon Smith, are right here for a telephone appointment, conference calls and also virtual meetings.
Last month, I wrote about the decision in the decision of the Registrar in Bankruptcy sitting in the Court of Queen’s Bench of Alberta in Edmonton. The case, Morrison (Re), 2019 ABQB 521, dealt with the issue of student loan bankruptcy discharge Canada.
What happens to student loans if you declare bankruptcy?
This was an application according to s. 178( 1.1) of the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (BIA). As a whole, student loans cannot be released by a bankruptcy discharge where the date of bankruptcy took place within seven years after the day on which the bankrupt ceased to be a full time or part-time student.
However, Section 178( 1.1) of the BIA, permits after 5 years after the day on which the bankrupt, with student loan debt ceases to be a part-time or full-time student, the Court may, on an application, order that such financial debt will be released. For such Canada student loan forgiveness, the Court needs to be assured that:
the bankrupt person has really acted in good faith about their commitments under their student debt loan agreement
the bankrupt will remain to experience financial difficulty to such an extent that the bankrupt will be unable to pay that financial debt
The Registrar discovered that the timing of when Ms. Morrison filed for bankruptcy compared to the seven-year cut-off was very close. The bankrupt’s key interest and her intent at the time of meeting with the Trustee were to get a discharge from all of her creditors on equal ground. The Registrar decided that Ms. Morrison did not seek bankruptcy to avoid only her student loan debt but rather to deal with every one of her debt problems.
There was obviously miscommunication between Ms. Morrison and her Trustee. The problem was that the miscommunication aggravated her specified objective.
The federal government did not oppose the discharge. The Registrar decided that her student loan debt should be discharged. He made a conditional order of discharge taking everything, including her surplus income, into consideration.
Both Canada Student Loans (CSL), as well as Ontario Student Loans (OSL), appealed the Registrar’s decision to a Judge of the Court of Queen’s Bench of Alberta. The reason OSL was involved was that her education was in Ontario. She later moved to Alberta to pursue work opportunities.
The Commercial Court’s review of a Registrar’s decision
The Judge first considered what is the proper criteria he needs to use. He determined that when it comes to the Commercial Court’s review of a Registrar’s decision, the Judge stated that the criteria that need to be followed are:
findings of fact are deserving of deference unless there is an overriding and palpable error;
questions of the law and matters of principle are reviewed on the standard of accuracy and correctness;
concerns of mixed fact and law exist along within a range in between the above 2 requirements;
a mistake in characterizing or thinking about the correct legal examination to be used attracts accuracy; and
in order to disrupt a discretionary determination, the reviewing Court needs to discover that the Registrar erred in principle or in law or failed to think about an appropriate aspect or took into consideration an inappropriate factor, resulting in a wrong conclusion, thus allowing the assessing Court to use its discretion to replace the Registrar’s findings.
The Judge’s review of the Registrar’s decision
The provision of the BIA that Ms. Morrison applied under is Section 178(1.1) of the BIA. That section states:
“Court may order non-application of subsection (1):
(1.1) At any time after five years after the day on which a bankrupt who has a debt referred to in paragraph (1)(g) or (g.1) ceases to be a full- or part-time student or an eligible apprentice, 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.”
The Judge stated that as the legislation indicates, the determination of whether either of the called for parts of “good faith” and “financial difficulty” is established is contextual and fact-specific. It is based upon considering all aspects of the particular situation. Also if pleased that the requisite elements are present, the Court still maintains a discretion to decline the granting of such relief.
Can you put student loan on bankruptcy – Good faith
The Registrar’s finding was that Ms. Morrison’s actions evidenced an underlying behaviour of good faith but that objective was overborne by life getting in her way. The Judge accepted the part that life got in her way might be real in regard to the very early post-student years of 2008-2014. However, he decided that starting in 2014 she began to make a relatively decent living, yet made no effort to start to repay her student loan debt.
The Judge analyzed Ms. Morrison’s behaviour once she started earning a better income in 2014 and her statements concerning why she filed for bankruptcy. He also remarked that it was plain from her rancour and annoyance directed at her Trustee because her strategy to have bankruptcy free her from her student loan debt failed. She felt the Trustee did not advise her properly on the timing of the bankruptcy as related to when she ceased to be a full-time or part-time student. She was upset that she had this student loan bankruptcy discharge Canada issue.
The Judge then reviewed what are the things he must consider in trying to determine good faith. He stated that the relevant cases suggest, good faith that has to be shown in order for the application to succeed connects to the loan, not the bankrupt’s general behaviour throughout the bankruptcy. He said the things he must consider are as follows:
whether the student loan financing was used for the desired purpose;
did the person complete the financed education;
has the education obtained provide financial gain to the bankrupt;
were reasonable attempts made to clear up the student financial debts;
has the person actually used available alternatives, such as interest relief or loan remission;
the timing of the bankruptcy;
do the student loan debt comprise a considerable component of the total debt;
did the applicant get enough work and earnings to be reasonably expected to make payments on the loan;
the way of life of the applicant;
whether the applicant had adequate income for there to be surplus income under the Superintendent of Bankruptcy’s directive;
what offers the bankrupt might have made to the lending administrators and their reactions; as well as
whether the bankrupt was hampered at any time with health problems which would have either reduced the amount the person could work or entirely eliminate the possibility of working.
In weighing all these factors, the Judge was of the view that what counted against Ms. Morrison was her absence of initiative in attempting to repay the debt on some basis. The Judge also found that, notwithstanding that Ms. Morrison has struggled both personally and financially, and had a run of rotten luck, this could not excuse her from failing to make any attempt to repay the student loans.
Therefore, the Judge disagreed with the Registrar. He found that she did not meet the test of acting in good faith.
How can I get my student loans forgiven in Canada – financial difficulty
Both CSL and also OSL contended that financial difficulty, unlike the Registrar’s conclusion, has not been proven as Ms. Morrison’s own evidence shows she has the ability to make some repayment towards the debt. CSL likewise suggested that the Registrar decreased the statutory limit for financial difficulty by finding that the evidence need only show that settlement will provide a hardship to her rather than revealing the bankrupt will be unable to pay the debt.
Section 178(1.1)(b) of the BIA states regarding financial difficulty:
“the bankrupt has and will continue to experience financial difficulty to such an extent that the bankrupt will be unable to pay the debt.”
The Judge took this section to indicate that, for the present as well as in the foreseeable future, the bankrupt’s financial position will not allow them to genuinely both pay their debts and subsist in an affordable method.
Therefore, in His Honour’s view, the idea of a settlement of student debt may well entail some challenges or hardship. It is just when the difficulty would deny an individual a level of practical subsistence that the “financial difficulty” aspect of this section comes into play.
Student loan debt Canada forgiveness – The decision on appeal
The Judge agreed with CSL that the Registrar had lowered the bar on the determination of financial difficulty from what is intended in the BIA. He also found that Ms. Morrison has some capacity to make some contribution towards retiring the student loan debts concerned. The evidence also showed that CSL and OSL were open to some sort of repayment offer.
Accordingly, the Judge determined that the demands of s 178( 1.1) have actually not been met by Ms. Morrison and her original application is unsuccessful. Therefore, he reversed the Registrar’s decision and allowed the appeal of CSL and OSL.
The Judge further ordered that she is, nevertheless, at liberty to make a re-application (in this bankruptcy) no earlier than one year from the date of his decision. He further stated that any re-application will need to be supported by proof of good faith in relation to any kind of settlement to either CSL or OSL as well as her full disclosure of her financial position at that time.
The Judge said he did not wish to “pile on”, so he did not order any costs to be paid.
Student loan bankruptcy discharge Canada summary
I hope that you have found this student loan bankruptcy discharge Canada information useful. Do you have way too much debt? Before you reach the phase where you can’t stay afloat and where financial restructuring is no longer a viable alternative, contact the Ira Smith Team.
We know full well the discomfort and tension excessive debt can create. We can help you to eliminate that pain and address your financial issues supplying timely, realistic and easy to implement action steps in finding the optimal strategy created just for you.
Call Ira Smith Trustee & Receiver Inc. today. Make a free appointment to visit with one of the Ira Smith Team for a totally free, no-obligation assessment. You can be on your path to a carefree life Starting Over, Starting Now. Give us a call today so that we can help you return to an anxiety-free and pain-free life, Starting Over, Starting Now.
I have written before on the issue of the difficulty in discharging student loans through bankruptcy. Bankruptcy will certainly not release your student loans debt until you’ve been out of full or part-time studies for 7 years. It is also question and answer #8 in our TOP 20 PERSONAL BANKRUPTCY FAQS found on our main website. In Brandon’s Blog, I want to drill down into the issue of an OSAP bankruptcy.
What is OSAP?
The Ontario Student Assistance Program (OSAP) is a financial assistance program that can assist students in spending for college or university.
OSAP provides money via:
Grant: cash you do not need to repay
Loan: a loan you are required to pay off when you’re done college or university
OSAP can assist your spending for:
tuition
books and supplies/equipment
student fees billed by an institution
living expenditures
childcare
Amongst the various categories of people who are not eligible for OSAP, one is those people who have filed for either personal bankruptcy or a consumer proposal. As you might imagine, the rules surrounding OSAP bankruptcy are not simple. Let’s do some drilling down now!
Students that did not get student loans before the day they declared bankruptcy or filed a consumer proposal
If the student has been discharged from bankruptcy or fully completed a consumer proposal, she or he does not require to offer any type of supporting paperwork in order for their OSAP application to be reviewed.
If the student is an undischarged bankrupt or has not completed the consumer proposal, the student must supply a letter from their licensed insolvency trustee (formerly called a bankruptcy trustee) or consumer proposal administrator. The document must show the day the student filed for either bankruptcy or the consumer proposal and that these 2 matters have actually been or will be satisfied:
Ontario and Canada is not a creditor in the bankruptcy or consumer proposal as an outcome of monetary help provided via OSAP; and
no monetary help offered to the student via OSAP during the current OSAP year will be taken in the insolvency proceedings to pay back the creditors
Discharged and the student is not presently enrolled in studies
If the student is discharged from bankruptcy or has successfully completed a consumer proposal, his/her OSAP application will not be decided upon until the student gives evidence that they have no amount owing on any student loans.
Alternatively, if applicable, the student can show that he/she received relief in their bankruptcy by way of a court order stating that section 178(1)(g) of the Bankruptcy and Insolvency Act (Canada) (BIA) no longer applies to the student loans.
In this situation, the student needs to supply:
evidence that an order of discharge or full completion of the consumer proposal has been achieved and that 3 years have expired since that date
a copy of the notice of bankruptcy/consumer proposal
letter from the student’s bank and/or the National Student Loans Service Centre confirming there is no outstanding balance
any relevant court order
Discharged and continuing a program of study
If the student is discharged from bankruptcy or has successfully completed a consumer proposal, his/her OSAP application will not be decided upon until the student gives evidence that they have no amount owing on any student loans.
Alternatively, if applicable, the student can show that he/she received relief in their bankruptcy by way of a court order stating that section 178(1)(g) of the BIA no longer applies to the student loans.
In this situation, the student needs to prove that he/she meets all of the following criteria:
at the time the student declared bankruptcy or filed the consumer proposal, they were enrolled in an accepted program of study at an accepted school and taking the minimum called for course load
the student remains in the same accepted program they were in on the date of bankruptcy/consumer proposal filing date
the student has not had a break in studies longer than 6 months since the date of bankruptcy/consumer proposal filing date
it has not been greater than 3 fiscal years since the date of bankruptcy/consumer proposal filing date
In this situation, the student needs to supply:
evidence that an order of discharge or full completion of the consumer proposal has been achieved and that 3 years have expired since that date
a copy of the notice of bankruptcy/consumer proposal
letter from the student’s bank and/or the National Student Loans Service Centre confirming there is no outstanding balance
any relevant court order
letter from the student’s Financial Aid Office verifying that the program of study in which the student was registered at the time of the bankruptcy/consumer proposal filing, is the same as the program the student is now applying for
Undischarged bankrupt or has not yet fully completed the consumer proposal
If the student is an undischarged bankrupt or has not successfully completed a consumer proposal, the processing of the student’s OSAP application will not be completed until the student gives evidence that they have no amount owing on any student loans.
In this situation, the student needs to prove that he/she meets all of the following criteria:
at the time the student declared bankruptcy or filed the consumer proposal, they were enrolled in an accepted program of study at an accepted school and taking the minimum called for course load
the student remains in the same accepted program the were in on the date of bankruptcy/consumer proposal filing date
the student has not had a break in studies longer than 6 months since the date of bankruptcy/consumer proposal filing date
it has not been greater than 3 fiscal years since the date of bankruptcy/consumer proposal filing date
In this situation, the student needs to supply a letter from their licensed insolvency trustee or consumer proposal administrator. The document must show the day the student filed for either bankruptcy or the consumer proposal and that these 2 matters have actually been or will be satisfied:
Ontario and Canada is not a creditor in the bankruptcy or consumer proposal as an outcome of monetary help provided via OSAP; and
no monetary help offered to the student via OSAP during the current OSAP year will be taken in the insolvency proceedings to pay back the creditors
The student will also need to supply a:
letter from the student’s bank and/or the National Student Loans Service Centre confirming there is no outstanding balance
any relevant court order
letter from the student’s Financial Aid Office verifying that the program of study in which the student was registered at the time of the bankruptcy/consumer proposal filing, is the same as the program the student is now applying for
Summary
I hope you now understand that the whole area of OSAP bankruptcy and student loans in either a bankruptcy or consumer proposal is not as simple as you might have originally thought. This is especially the case if the student is continuing his or her studies.
Do you have too much debt? Are you in financial distress? Do you not have adequate funds to pay your financial obligations as they come due?
If so, call the Ira Smith Team today. We have decades and generations of experience assisting people looking for financial restructuring, a debt settlement plan and to AVOID bankruptcy.
As a licensed insolvency trustee (formerly called a bankruptcy trustee), we are the only professionals accredited, acknowledged and supervised by the federal government to provide insolvency advice and to implement approaches to help you remain out of personal bankruptcy while eliminating your debts. A consumer proposal is a government approved debt settlement plan to do that. We will help you decide on what is best for you between a consumer proposal vs bankruptcy.
Call the Ira Smith Team today so you can eliminate the stress, anxiety, and pain from your life that your financial problems have caused. With the one-of-a-kind roadmap, we develop just for you, we will immediately return you right into a healthy and balanced problem-free life.
You can have a no-cost analysis so we can help you fix your troubles. Call the Ira Smith Team today. This will allow you to go back to a new healthy and balanced life, Starting Over Starting Now.
An interesting American case about student loans debt
Student loans debt is nearly impossible to get rid of in bankruptcy. A case winding its way through the US court system has piqued our intellectual interest. A father, who is a discharged bankrupt, is taking the lender who HE borrowed funds from for his child’s education to Court. The lender is continuing to pursue collection efforts against the father on the basis that the provisions of the Bankruptcy Reform Act of 1978, as amended, codified in Title 11 of the United States Code and commonly called the “Bankruptcy Code” (“Code”), does not release the father from what is in reality student loans debt. The father is taking the lender to Court for a ruling that by virtue of his discharge, he is released from that debt like all his other debts. It has raised the question whether the same student loans debt rules should apply in that case.
The Canadian perspective
We are not qualified to express any opinion on the US legal case before the US Court, but we are qualified to discuss the issue from the Canadian perspective. We started thinking whether this same situation could arise in Canada for student loans.
Last week we discussed student debt bankruptcy from the perspective of the student. Previously, we have written blogs and created a vlog about student loan debt, including:
So this week, we’re discussing student loan debt and bankruptcy from a very different and interesting angle. Could a Canadian lender take the position against a Canadian parent borrower who on the loan application described the purpose of the loans for the funding of his or her child’s Canadian post-secondary education, that the loans qualify as student loans under the applicable Canadian statutes, including, the Bankruptcy and Insolvency Act (Canada) (BIA). Stated otherwise, are such loans the same as student loans under Canadian law and can bankruptcy cut such loans if you’re not the student?
Are student loans necessary?
Many young Canadians need student loans to get a post-secondary education. To qualify as Canadian student loan debt, the loans must be issued under a specific Canadian student loan statute: the (i) Canada Student Loans Act; (ii) Canada Student Financial Assistance Act; (iii) Apprentice Loans Act; or (iv) any enactment of a province that provides for loans or guarantees of loans to students.
All students need financial help to be full-time university students. The only real places that such assistance can come from is either the parents, if they are willing and able to do so, student loans, or both. Many Canadian parents pay a hefty part of students’ tuition fees, even if it means sacrificing their financial stability, to help their children avoid a post-graduation life burdened by tens of thousands of dollars of student debt. Others may wish to, but they cannot afford to do so.
So are student loans and the resultant debt necessary? In most cases, yes.
Can a parent co-sign for or guarantee their child’s student loans?
The short answer is no. As I have already stated, to qualify as a student loan, the loan has to be made under the provisions of one of the Federal loan statutes mentioned above, or any such similar Provincial legislation. Nowhere in those student loans statutes is there a place for either a guarantor or cosigner. In fact, the Federal statutes all have similar language stating that upon the death of the borrower, the Federal government will repay the outstanding part of the loan. In addition to there not being any sections that allow for a guarantor or cosigner, the specific section dealing with the death of the borrower does not limit the government’s guarantee by using words like “….and if the lender is unable to collect in full from any guarantor or cosigner”. The reason is simple, student loans cannot be guaranteed or otherwise borrowed by anyone other than the student.
Will bankruptcy eliminate student loans debt?
Student loans are nearly impossible to get rid of in bankruptcy. Section 178(1) of the BIA states:
“(g) any debt or obligation in respect of a loan made under the Canada Student Loans Act, the Canada Student Financial Assistance Act or 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;
(g.1) any debt or obligation in respect of a loan made under the Apprentice Loans Act where the date of bankruptcy of the bankrupt occurred
(i) before the date on which the bankrupt ceased, under that Act, to be an eligible apprentice within the meaning of that Act, or
(ii) within seven years after the date on which the bankrupt ceased to be an eligible apprentice;”
So if you’re a student, bankruptcy will only end student loans if you’ve ceased to be a full or part-time student for more than seven years and either declare personal bankruptcy or make a debt proposal to your creditors, most likely through a consumer proposal.The only other option is to attempt to seek from the Court relief because of undue hardship, but this is very difficult, if not impossible.
What is required to meet the burden of undue hardship?
If the Court is satisfied that you meet the two-pronged test, you’ll be discharged from your student loans obligations in bankruptcy only if the :
acted in good faith in connection with your obligation to repay your student loan debt; and (emphasis added)
have experienced, and will continue to experience, financial difficulty that will prevent you from repaying this debt
It’s then up to the bankruptcy court to decide whether they forgive your loans, either in full or in part. One of the difficulties in trying to prove undue hardship is that there is no clear definition for what makes up hardship; each bankruptcy court across Canada may use a slightly different interpretation. The only thing that’s clear is that you must prove that having to continue to pay the student loans after bankruptcy would be a financial hardship for you. If you try this route, the Court will look at ALL of your income and expenses.
The Court may decide you are not trying hard enough, or, may look at things like your small car you use to get to work, which you purchased used (instead of taking public transit), your cell phone and your internet expenses, and decide that these are luxuries you do not need. If you are a smoker, the Court may very well decide that if you were not addicted to tobacco, you could start to repay some part of your student loans.
Will bankruptcy eliminate student loan debt if you are not the student?
I don’t know what the eventual disposition of the US case which I mentioned at the beginning of this blog will be, but based on all the above, in my view in the Canadian context, a parent, relative or friend cannot guarantee, cosign or borrow for a loan that qualifies as a Canadian student loan. If you borrow to fund your child’s education, then you are borrowing under an ordinary commercial transaction and the applicable student loan sections of the BIA do not apply.
So if you have borrowed for this purpose, only the normal provisions of the BIA apply, and you will get a discharge from that and your other debts upon your discharge from bankruptcy. However, if you pledged any of your assets in support of such borrowings, such as your home, the lender does have the right to enforce its security against such assets if you cannot repay, whether you are bankrupt or not.
If we get to see you early enough, at the first sign of trouble, you can use and carry out one of the bankruptcy alternatives, to free you from the burden of your financial challenges to go on to be a productive, contributing member of society and not be plagued by debt problems.
Bankruptcy law is very complicated and requires the expertise of a professional licensed insolvency trustee. Ira Smith Trustee & Receiver Inc. is here to help. With a cumulative 50+ years of experience dealing with diverse issues and complex files, we can get you back on your feet Starting Over, Starting Now. We can help. Call us today.
People consider us bankruptcy experts because we wrote the eBook which is sold on Amazon.ca, explaining the Canadian personal insolvency and bankruptcy system, specifically directed to the person stressed out with too much debt.
Student debt bankruptcy is a very serious issue in our country. We’ve looked at the problem from different angles in a series of blogs and like you, are left with more questions than answers.
Unfortunately, regardless of which government is in power, there’s been no solution or improvement regarding this kind of debt and student debt bankruptcy. In fact, university and college debt have now taken on epic proportions. According to the Canadian Federation of Students (the largest organization for post-secondary students in Canada), last year the number of student debt bankruptcy files of those who received student loans hit a 10-year high as more than 6,000 students declared bankruptcy in 2015, more than double the number in 2014.
We don’t have a level playing field nationally
The costs of post-secondary education have become prohibitive. Firstly, we don’t have a level playing field. The cost of tuition varies greatly from province to province, from city to city and from college to university (where the same program is offered). According to a study by the Canadian Centre for Policy Alternatives the cost of tuition alone (not including books, living expenses, transportation, entertainment, etc.) is:
$8,756 in Ontario
$6,969 in Nova Scotia
$2,655 in our easternmost province
$2,350 for the police foundations program at Georgian College
$4,466 for the police foundations program at Laurentian University in the same buildings with the same teachers as Georgian College
Some Provinces are coming up with a new secret tactic
Newfoundland and Labrador have replaced student loans with needs-based grants, essentially wiping out tuition costs. Prince Edward Island and Nova Scotia don’t charge interest on these loans but there are still too many people who are being crushed by a mountain of student debt. Recently, the Ontario Liberal government announced in its recent budget that it is combining existing programs to create an Ontario Student Grant, which would pay for average college or university tuition for students from families with incomes of $50,000 or less.
The Canadian Federation of Students has called on the federal government to make tuition at university and college free for all students but that’s not going to happen.
So the new secret tactic is free university tuition? It may be a nice idea but who’s going to pay for it?
What to do if you have too much debt
Unfortunately, we can’t solve the student debt issue where during studies, or after graduation, (former) students have debt they cannot afford to repay. However, we are experts in dealing with debt.
If you’re a student loan recipient who’s thinking of declaring bankruptcy or you’re being strangled by general financial obligations that you can’t meet, contactIra Smith Trustee & Receiver Inc. Given immediate action and the right financial plan, we can have you on your way to a debt free life Starting Over, Starting Now. Watch for our blog next Tuesday when we’ll be discussing Student Loan Debt: Will Bankruptcy Eliminate It If You Are Not The Student?
It’s commonly believed that all parents dread having the “sex” talk with their kids, but a recent study from BMO shows parents would rather talk to their kids about sex than their financial situation and managing debt. Imagine that! Canadians are stressed about money and probably feel ill-equipped to educate their kids about finances and managing debt.
Personal debt in Canada
According to a new national study conducted by Leger:
Canadians struggle with regret over financial decisions
Argue over spending
Feel pressure to keep up with friends or colleagues
Bend the truth to friends and family about their financial situation in order to save face
A Bank of Montreal study reports that:
More than 33% of all Canadians are ashamed of the debt that they have
Almost 40% say they stress over debt levels multiple times a day
There’s no doubt about it, money and managing debt is the top source of stress in our lives. Why are we so financially stressed? Why are Canadians stressed over debt and have so much trouble managing debt? Here are 10 of the most common reasons:
It’s time to become financially literate and educate your kids, not just about the birds and the bees, but about finances and managing debt. Foresters recently offered 5 tips to get smarter about your finances:
Learn everything you can about your finances, including your mortgage terms, bank interest rates and credit score
Start with the simple things like contributing to RRSPs, setting up RESPs for your kids and protecting your family’s financial future with life insurance
Keep track of every penny you spend for a couple of months and look for ways to cut back and start saving. Even a small commitment to saving will make you feel better about your finances
Look ahead 10, 20 and 30 years. Imagine the life you want and what it will take to make that happen
Talk to your kids regularly about money, involve them in household budgeting, open bank accounts for them and encourage them to save for things they want
How to get help with debt
All of this is great advice to avoid financial problems, but if you are already in serious financial difficulty and don’t know where you will begin on how to manage your debt, you need professional help now. ContactIra Smith Trustee & Receiver Inc. Don’t ignore your debt issues. Face them head on and with the help of the Ira Smith team you’ll be on your way to conquering debt Starting Over, Starting Now.
Canada student loan repayment is and will continue to be a large issue. Student loan debt can be an enormous burden. Between 2012 and 2013, more than 400,000 students borrowed money to help pay for more post secondary education. (The Canadian Federation of Students). Accumulated federal student loan debt in Canada is now more than $15-billion. That doesn’t include obligations on lines of credit, credit cards or provincial loan programs – a total estimated to be as much as $8-billion. (Globe & Mail). This amount of debt affects our entire economy. Unfortunately many students can’t pay back their loans causing Canada student loan repayment to be a huge issue for both recent graduates and our economy. After trying unsuccessfully to collect for more than six years, the government writes off the loans. In total, $540 million worth of student loans has been written off over the last three years. (Human Resources and Skills Development Canada).
What happens if you don’t make your student loan payments? Your student loan will not be erased until you have paid it in full. If you don’t make your loan payments, you will be in default. Your Canada student loan repayment obligation continues, notwithstanding the above-noted government loan reserve and write-off policy.
What happens if I’m in default on my student loans? If you are in default of your Canada student loan repayment obligations:
You could be ineligible for further loans until the default is cleared.
It can affect your ability to get a car loan, mortgage or credit card.
Your income tax refund and HST rebate can be withheld.
Interest will continue to build up on the unpaid balance of your loan.
Will bankruptcy erase my student loans? Bankruptcy will not discharge your student loans until you’ve been out of school for seven years. There are cases when student loans have been discharged after five years, but the borrower has to prove before a court that they would undergo extreme hardship if required to wait seven years. So depending on how long it has been since you were last a full or part-time student for which you received a student loan, bankruptcy may not clear you of your Canada student loan repayment obligations.
What can I do if I can’t meet my Canada student loan repayment obligations? One of your options is the federal government’s program called the Repayment Assistance Plan (RAP). There are eligibility requirements and your loan must not be in default. If you qualify:
You can make affordable payments based on your gross family income and family size. Your loan payments would never exceed 20% of your gross family income.
Your monthly student loan payments will either be reduced, or you will not have to make any payments.
You have a maximum repayment period of 15 years (or 10 years for qualified borrowers with a permanent disability).
Enrolment is not automatic and you would have to re-apply for this plan every 6 months.
Don’t wait for your Canada student loan repayment debt to become critical and don’t ignore any of your debt. It will not go away on its own. You need professional help from a trustee. ContactIra Smith Trustee & Receiver Inc. and make an appointment today. We approach every file with the attitude that financial problems can be solved given immediate action and the right plan. Starting Over, Starting Now you can get back on the road to financial health.
