Student Loan Sent to Collections

Question: I currently have collection agencies calling me off the hook demanding money after defaulting on my student loan. Most recently I gave birth to what I thought would be a healthy baby boy but I found out differently.

My question for you is what are my options. I am not working and do not plan on returning to work for a while. All this stress coupled with creditors constantly calling is an enormous weight to carry. My fiance currently supports me and my son and also pays child support for 2 other children. Please any advice would be truly appreciated.

Student Loan Debt Repayment

You have a number of  options.

In the short term you could simply ignore the calls.  When they call, you simply tell them that you are not working and are not able to make payments, and then you hang up the phone.  They may call back, but again, you tell them you are not working and hang up the phone.  By hanging up, you reduce the stress of actually having a discussion with the collection agents.

Repayment Assistance Plan (RAP or Plan)

The federal government has a student loan repayment program for debtors having trouble paying back their student loans. The Plan is designed to help you by arranging payments that you can reasonably afford. Sometime you can even defer payments until you income increases.  Enrollment in the plan is not automatic, you must qualify.  More information is available on the government’s Repayment Assistance Plan page.

Consumer Proposal

The other option to deal with your student debt would be to file a consumer proposal. In Canada there are very specific rules regarding student loan debt.   You must have been out of school for seven years for your student loan debt to be discharged by a consumer proposal. There are hardship provisions that will allow you to apply for a reduction in your debt after 5 years which may work in your situation.

If you have not been out of school for seven years, a consumer proposal may still help by dealing with your other debts. By reducing your other debts it can make it easier for your to repay your student loans.

Bankruptcy

You final resort may be to declare personal bankruptcy. Again however the 7 year rule applies to bankruptcy as well as a consumer proposal. If you have not been out of school for 7 years your student loans will not be discharged in a bankruptcy.  Filing bankruptcy may however provide you some protection from your other debts so that you may be better able to deal with your student loan debt.

For more information, review our article on Student Loan Debt Relief.

Dealing with student loan debt is not only overwhelming but it is a complicated legal area.  We recommend you contact a licensed bankruptcy trustee or get a free on-line evaluation about your particular situation.

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