Have you recently filed a consumer proposal and are concerned about how it may affect your ability to get funding through the Ontario Student Assistance Program (OSAP)?
The good news is that obtaining an OSAP loan while you’re in a consumer proposal (or bankruptcy) is possible. You’ll need to submit additional information with your application for the OSAP program to decide whether you qualify for financing.
However, even with a complete application, there’s no guarantee you’ll get approved for funding. OSAP reviews each application on a case-by-case basis and will assess various factors to determine your eligibility.
This article will explain how you can apply for an OSAP loan after filing a consumer proposal or personal bankruptcy.
Why it’s harder to get an OSAP loan after filing a consumer proposal
Your credit score will significantly decline when you file for insolvency through a consumer proposal (or bankruptcy). And with bad credit, getting a loan application approved will prove more challenging. Lenders will perceive you as a high-risk borrower and will be less willing to extend financing to you.
Can you get an OSAP loan with bad credit?
Can you still get an OSAP loan if you have bad credit? The short answer is it depends.
If you’re 22 or older, the government will run a credit check on you to review your credit history. They’ll look to see whether you have been delinquent for more than 90 days on three or more credit accounts (with a combined value of $1000 or more) in the past three years. If they find evidence of this delinquency, you’ll be ineligible to receive funding through OSAP.
What happens if you fail this credit check? You can send a credit check appeal to the OSAP Appeal Board if your poor credit history is due to financial difficulties beyond your control. You’ll also need to prove that you’ll be able to repay your student loans in the future. If your appeal is successful, you may receive an OSAP loan despite your tarnished credit score.
How to get an OSAP loan while in a consumer proposal
There’s nothing to prevent you from applying for OSAP funding with an active consumer proposal (or bankruptcy). What’s key is properly disclosing the details of your proposal, including your discharge status. The OSAP program will use this information as part of the application review process and decide whether to grant you financing.
While each case is different, in general, you’re more likely to receive approval for an OSAP loan if:
- It’s your first time applying
- You don’t have previous student loans or other government debts that are in default and included in your consumer proposal
- You’re current with your consumer proposal payments
Complete the OSAP application form
The first thing you’ll need to do is complete an OSAP application form. Ensure you fill out each section thoroughly, especially those that pertain to insolvency. Otherwise, your application will be rejected.
The OSAP application form contains three questions that relate to consumer proposals, which appear on page 17:
- Question #610: Have you ever filed for bankruptcy or initiated a related event?
- Question #611: Is your bankruptcy discharged?
- Question #612: What is the date you filed for bankruptcy or initiated a related event?
The term “related event” refers to any insolvency proceeding under the Bankruptcy and Insolvency Act. Naturally, this includes a consumer proposal.
Provide the required documentation about your consumer proposal
Let’s say you answered “yes” to question #610 and “no” to question #611. In other words, you have not yet completed your consumer proposal. In this scenario, you’ll need to provide OSAP with a letter from your Licensed Insolvency Trustee that confirms the following:
- The Government of Canada and the Province of Ontario aren’t creditors for government-guaranteed student loans included in your proposal
- No funds that you receive from OSAP will be distributed to your creditors
- The consumer proposal filing date
Alternatively, let’s assume you’ve already completed your proposal (meaning you answered “yes” to question #611). In that case, you must provide the following:
- A copy of your Certificate of Performance, or
- A copy of your consumer proposal search results from the Bankruptcy and Insolvency Records Search
Note: Suppose you previously negotiated student loans through an insolvency proceeding on or after May 11, 2004. In that case, you need to submit proof that there’s no outstanding balance. Depending on your circumstances, you may also need to provide additional documentation.
What if you previously received student loans?
Have you received funding for government-guaranteed student loans in the past? If so, you’ll need to meet one of the following two conditions to qualify for further financing while in a consumer proposal:
- You’ve paid off your prior student loan debt in full. If you’ve fully repaid your past student debt, you must provide proof that there’s no outstanding balance. Valid proof can include a statement from the National Student Loans Service Centre (NSLSC) or a letter from your lender (Canada Student Loans or OSAP).
- You plan to continue your current study program. In this case, you can provide a letter from your post-secondary institution that confirms the following details:
- You were enrolled in your educational program at the time you filed your consumer proposal
- You’re currently enrolled in the same program in which you were enrolled when you filed your consumer proposal
- You took no study break that lasted longer than six months following your consumer proposal filing date
Another scenario is that you cleared prior student loan debt through a past bankruptcy or consumer proposal. In this case, you’ll only qualify for a new OSAP loan if it’s been at least three years since you received your bankruptcy discharge or completed your proposal.
In other words, OSAP will give you access to additional financing for an educational program you’ve already started. However, they won’t offer you a loan for a new program until:
- You’ve paid off your existing student debt in full, or
- Three years have passed since you cleared your student loan debt through an insolvency proceeding
Our final thoughts
You can still get access to an OSAP loan after filing for a consumer proposal. While there’s no guarantee you’ll qualify for financing, there’s no harm in applying either. Just remember to be honest and transparent. Disclose all the details of your consumer proposal and provide the relevant documentation as required.
Never hide any facts about prior OSAP student loans you received or bankruptcies or consumer proposals you’ve filed. The OSAP program will find proof of any financial problems, outstanding debt, and negative records during your credit check.
Are you contemplating a consumer proposal to resolve your debts but still have questions about how it will impact your eligibility for a student loan? If so, book a free consultation with David Sklar & Associates. One of our seasoned Licensed Insolvency Trustees will assess your financial situation and advise if a consumer proposal is the best debt relief solution for you.
Be sure to visit our blog to learn how student loans are treated under a consumer proposal.
Attending a college or university should be a rewarding experience, not a disheartening one. If your debts are weighing you down, contact David Sklar & Associates today to learn how you can deal with them once and for all. We’ll be there for you every step of the way!
