If You Declare Bankruptcy

Overview

Declaring bankruptcy when you have student loans can have serious long-term effects on your financial and educational future.

The impact on your student loans:

  • Immediate repayment - If you declare bankruptcy, your Canada and B.C. student loans automatically go into repayment status and you must start paying back your loans unless you are pursuing the same course of studies.
  • Long-term ineligibility - If you declare bankruptcy, you may not be eligible for any more StudentAid BC funding until 10 years (or 8 years under financial hardship conditions) after you have left post-secondary studies.

Under the Bankruptcy and Insolvency Act, students who declare bankruptcy on or after July 7, 2008, will not be able to receive a discharge on their student loan debts until 7 years (or 5 years under financial hardship conditions) after the date they last attended school. If you have declared bankruptcy but have not been discharged from that process on or before this date, these periods also apply to the discharge of your student loans.

In addition to the time required for student loans under a bankruptcy to be discharged, the Canada Student Loans Program also requires another three-year period to pass before obtaining a release for purposes of attaining additional Canada student loans.  This means you will not be eligible to apply for Canada or B.C. student loans for a total of 10 years (or 8 years under financial hardship conditions) from the date you left school.

Applying for loan reinstatement

You must complete two separate reinstatement processes after declaring bankruptcy: one for Canada student loans and the other for B.C. student loans. If you are no longer attending school, you must receive a clearance letter indicating a release of restrictions from the Canada Student Loans Program before you can apply for reinstatement to receive more B.C. student loans.

For information about Canada student loan bankruptcy and reinstatement policies, visit the National Student Loans Service Centre.

How to get your B.C. student loan eligibility reinstated

If your declare bankruptcy, you will not be eligible for any StudentAid BC programs until you request reinstatement and the request has been approved by the StudentAid BC appeal committee.

There are two types of reinstatement for B.C. student loans:

To start this process, a B.C. student loan reinstatement due to bankruptcy appeal form is available online or by contacting StudentAid BC. You are encouraged to contact the appeals unit to ensure that you are aware of all documents you need to submit for a complete application.

You are more likely to be reinstated if you submit all required documents.

The reinstatement after bankruptcy appeal process

The reinstatement after bankruptcy appeal process helps the StudentAid BC appeal committee to determine:

  • if there are exceptional circumstances that led to your bankruptcy and that warrant waiving standard StudentAid BC policy
  • that you have made a reasonable effort to rehabilitate yourself financially since bankruptcy (unless you are in school and applying for conditional reinstatement)
  • that you have clear goals and a focus for your career
  • that your academic standing in your present or previous program of study is successful and warrants consideration for further funding to continue your education.

The appeal committee meets monthly. Once the committee has considered your request for reinstatement, a letter will be sent to you confirming the decision.

The appeal committee’s decisions on reinstatement after bankruptcy cannot be appealed. However, if you are denied reinstatement and you have more supporting documentation that was not provided in the initial reinstatement application that you think may change the decision of the committee, you can submit a new reinstatement application with all previous and added supporting documents and details of your bankruptcy circumstances for the committee to consider at a future date.

Debt management programs

If you declared bankruptcy on or after May 11, 2004, you may be eligible for debt management programs like interest relief and debt reduction in repayment.