‘Carol’ a Case History: Overwhelmed by Student Loans
In 2000, Carol (not her real name) came to David Sklar & Associates (DSAI) with major debt issues.
As a young, single mother in Scarborough with two small children, Carol found herself buried in unsecured debt from credit cards, bank loans and student loans. Working with Rhoda Lewis, an Estate Administrator at DSAI, Carol was able to declare Bankruptcy and erase her credit card and bank loan debts. Unfortunately, her student loans could not be discharged in a Bankruptcy, as it had only been 5 years since she had been a student. Although Carol had attended university for several years, she had been forced to withdraw before finishing, due to lack of funds and the demands of motherhood.
Finding a good job without a degree was a challenge, but Carol was able to work her way up from receptionist to a senior clerical position for a large Scarborough company.
Her children, while a blessing, were also a strain on her tight finances. As a single mom, she found herself unable to pay for her children’s needs – and to make all of her student loan payments.
Carol tried several times to negotiate lower payments, but without success. Eventually, her student loans went to collections – and Carol began to deal with ongoing pressure from collection agents. Her tax refund was seized by the Canada Revenue Agency for the federal portion of her student debt – and her life became much harder.
Carol did her best to pay back her loans, but was not able to make any headway. Finally, unable to handle the strain, she decided to get help.
Dealing with Student Loan Debt
Carol came back to David Sklar & Associates (DSAI) in 2006 – and requested that Rhoda Lewis once again act as her Estate Administrator. Together, they closely reviewed Carol’s finances and options in detail. Because it had been more than 10 years since Carol had been a student, she was eligible to discharge her student loans debt in a Bankruptcy. Note: In 2008, the length of time before student loans could be discharged with a Bankruptcy was reduced to seven years after ceasing to be a student.
Carol learned that a second bankruptcy would stay on her credit history for 14 years. That a Consumer Proposal would most likely run for five years at the end of which, it would stay on her credit history for three more years.
Carol did not want to file for Bankruptcy again and she sincerely wanted to pay back as much of her student loans as possible, so she decided to file a Consumer Proposal. At the time of the filing, Carol’s net monthly household income was $3,200 (salary plus child tax credits). Her only unsecured debt was her student loans of $30,000, and she had no non-exempt assets.
Proceeding with a Consumer Proposal
Working with Rhoda and the Trustee, a Proposal was written up – and filed by DSAI. The Proposal was for a repayment of less than the total outstanding loans – with monthly payments of $325 for a period of 60 months.
The Consumer Proposal was accepted by Carol’s creditors – and the collection efforts ceased immediately. Carol was to make monthly payments to DSAI who would then distribute the money as per the terms of the Proposal.
Carol’s Consumer Proposal has been running successfully and should be completed in 2011. Carol remains pleased with her decision to pay as much as possible on her student loans.
To protect our client’s privacy, details of this case have been altered.