Case Study: the Student
consumer proposal,  case studies,  student loans

Case Study: the Student

Student With Credit Card Debt

Kerri (not her real name) was a third-year student enrolled at York University working towards the completion of her psychology degree. She had accumulated credit card debt since her first year of university after applying for a credit card on campus.

She had $12,000 in credit card debt. In addition to this, she also had $10,000 in government student loan debts under OSAP.

Student Loans Aren’t Discharged

As Kerri was still a student, she was well aware that there was nothing we can do about her student loan debt. Under the Bankruptcy and Insolvency Act, student loans granted under a provincial or federal program cannot be extinguished unless a debtor has been out of school for at least 7 years. Kerri was clear that she would be responsible for repaying her student loans once she graduated from York.

She was however concerned about 2 things:

Kerri wanted to work out a settlement with the credit card companies that she could afford to pay and that would be fair to the companies that gave her the cards. She wanted to file a consumer proposal with our firm in order to do this.

Kerri was also concerned about her eligibility for new student loan money so that she could complete the fourth year of her degree. If she filed a consumer proposal, would she still be able to get new student loans?

Affordable Consumer Proposal Payments

To address here first concern, we reviewed Kerri’s budget and were able to come up with an affordable monthly payment towards her consumer proposal. She was living at home with her parents, who graciously allowed her to stay rent free while she was going to school. Kerri also had a part-time job in retail which allowed her to finance her proposal payments.

Applying For OSAP After A Consumer Proposal

To address her second concern, we directed her to a link at the OSAP website that addresses this very issue. As you can see in the PDF that just popped up in your new browser window, Kerri is eligible to receive additional OSAP student loan funds if she meets the following criteria after filing her consumer proposal:

  • at the time she filed her consumer proposal, she was enrolled in an approved program of study at an approved institution and was taking the minimum course load;
  • she continues to be enrolled at the same approved program of study in which she was enrolled at the time she filed her consumer proposal;
  • she hasn’t had a break in her studies of longer than six months since the date the proposal was filed; and
  • it has not been more than 3 years since the date the proposal was filed.

So great news! Kerri was able to get her credit card debt under control with the consumer proposal and get new student loan money to complete her psychology program at York.

As of this writing, Kerri is doing very well at school. Now that the debt monkey is off her back, she is able to focus on her schoolwork and get good grades. She is also getting more hours at work in her part-time job so that she can pay off her consumer proposal as quickly as possible.

Update: 21 November 2013

The OSAP website material referred to above is no longer present on the OSAP website. This implies that the rules for obtaining new student loan money after a bankruptcy or consumer proposal may have changed. Therefore, if you in a similar situation described in this case study, please contact a student loan officer at your school’s financial aid office and ask if you qualify.

This article deals with complex matters and may not apply to particular facts and circumstances. As well, the material and the references contained therein reflect laws and practices that are subjects to change. For these reasons, this article should not be relied upon as a substitute for specialized professional advice in connection with any particular matter.

© Fong and Partners Inc 2013.

Victor is the President of Fong and Partners Inc. He is a Licensed Insolvency Trustee and Chartered Professional Accountant. With over 20 years of experience in the insolvency field, Victor has been involved in both corporate and consumer insolvency engagements. Previously with a large national firm, Victor founded Fong and Partners Inc. in 2007 so that he could dedicate his professional life to help people from all walks of life to deal with their debt.