What to do if you are no longer able to reimburse your student loan? This is the question that a reader has asked us that failed to find jobs in his field and whose income is lower than expected.
The Quebec loan and scholarship program helps students continue their studies. These loans are guaranteed by the government and must be reimbursed at the end of studies or when interrupts them.
“I got my diploma two years ago, but I couldn’t find the right job I hoped. Currently, I have to combine part -time positions to manage to reach both ends. My income is insufficient to meet my basic expenses and repay my student loan, ”writes Alexis. What are the options in his situation?
Contact the lender
The first thing to do, according to Sophie Destautels, first principal director and trustee authorized in insolvency at Raymond Chabot, is to make her budget. Once the expenses are fixed and variable entrenched from the net income, we will see better if we can reimburse the loan, even partially.
It is then necessary to communicate with the lending financial institution to see if it is possible to take an agreement.
“For example, we will try to obtain a stay or new reimbursement conditions. If there is no possible solution, in this case, I recommend contacting an insolvency authorized trustee firm, ”she explains.
Specific rules
In terms of insolvency, there are specific rules for the student loan. It all depends if we finished our studies over seven years ago. In the case of Alexis, there are two years.
“His debt is not liberable, which means that he can actually make a proposal to his creditors, but that the portion which will not have been reimbursed at the end of it will still be due,” specifies Sophie Desautels.
Taking into account Alexis’ budget, the trustee will be able to present a repayment proposal to the lender, spread over a maximum of 60 months.
“When it comes to student loan, banks often claim a higher percentage than they have demanded for another type of debt. But most of the time, trustees manage to obtain suitable agreements for their customers, ”underlines Sophie Desautels.
The creditor will take into account several factors, such as the potential income of the person when he works in his field of study, if he has made efforts to reimburse the debt of studies, etc.
Have studies have been completed for over seven years? So we will be released from the whole debt, even the portion which would not have been paid within the framework of the proposal.
What about bankruptcy?
It is possible to include a student loan in a bankruptcy, but again, what will happen on the unpaid portion will depend on the end date of the studies. If more than seven years have passed, the person will be released from the totality of the debt, although this is not always guaranteed.
Otherwise, it will have to negotiate with the creditor at the end of the process, after nine months for a first bankruptcy, which therefore constitutes a short -term stay …
ADVICE
- If you cannot take an agreement with the lending financial institution, a trustee can help you find a solution. Give him all the details on your situation, your budget, the reasons why you cannot reimburse the student loan, etc.
- If the debts exceed $ 250,000, excluding mortgage debt from the main residence, in this case, the trustee will submit a concordatory proposal and not a consumer proposal.
- Student credit margins can also be included in a proposal or bankruptcy. Unlike the student loan, the debt will be extinguished once the proposal or the bankruptcy has been completed, regardless of the end date of the studies. However, creditors could oppose automatic release for the margin, depending on the situation of the debtor.
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