I am in need of some unbiased help! I also posted this in the "help now" forum.

I have about $35,000 in student loans (OSL and CSL) and about $15,000 worth of other unsecured debt.  I started getting student loans in 1992 and ceased to be a full-time student in August, 2000. The bank will not consolidate my debt, and I cannot afford much more than a $200/month payment in total to all the creditors. My debts are not at collection agencies yet...I have been dealing with hounding phonecalls from their own collections departments.

I was getting help from a debt councellor, and today for the first time, met with a trustee.  I was told by the debt councellor that since I don't have enough "extra" money left at the end of the month to make my creditors happy through a consumer proposal, I should file for bankruptcy.  This is what I was going to do with the trustee this morning, but the trustee thinks maybe a proposal is a better idea afterall.  I am so confused!!

Given my situation, what would you do?  The trustee is proposing to file a proposal stating that I can pay $200/month for 5 years.  From what i understand, if the Proposal is accepted, and after those 5 years are up, that which is still unpaid of my student loans still will exist? is that true? 

What the trustee said though, is that he hopes the new 5-year rule for absolving student loan debt (instead of the current 10 years) will come into effect before my 5 years of proposal payments is up.  Therefore, at the end of the 5 years of payments, I will have ceased to be a fulltime student for more than 5 years....so when the bank comes looking for the rest of my student loans at the end of the proposal, he can tell them that i ceased to be a fulltime student over 5 years ago, so they aren't entitled to any more money.  Is this true?? Is it that easy?

IF the creditors vote no to a consumer proposal, then I'll be claiming bankruptcy to absolve me of the $15,000 in debts (a small amount of money for a lot of pain!) and will still have my student loans to deal with......which currently has payments of $363 over the next 12-13 years. I know i can apply to the courts to have my student loans wiped out, but the trustee felt i might not be a great candidate for this because I do earn a modest income doing what I went to school for. (ie: at least I got a job from my education?!)

Is there anything else...good and bad...that I should know about a consumer proposal and how it affects student loans?  I thank you all for your help!  This is all very stressful and I want to make the best decision possible.

CambridgeChloe

 You wrote:

"Given my situation, what would you do?  The trustee is proposing to file a proposal stating that I can pay $200/month for 5 years.  From what i understand, if the Proposal is accepted, and after those 5 years are up, that which is still unpaid of my student loans still will exist? is that true?"

 Yes, your student debt will still exist. You would be going bankrupt (Consumer proposal - which is just a sibling to bankruptcy).

You Wrote:

"What the trustee said though, is that he hopes the new 5-year rule for absolving student loan debt (instead of the current 10 years) will come into effect before my 5 years of proposal payments is up.  Therefore, at the end of the 5 years of payments, I will have ceased to be a fulltime student for more than 5 years....so when the bank comes looking for the rest of my student loans at the end of the proposal, he can tell them that i ceased to be a fulltime student over 5 years ago, so they aren't entitled to any more money.  Is this true?? Is it that easy?"

 This new 5 year rule change is not going to fix the problem. The decision to discharge student debt still rests with the courts and it is not easy.  The decision to discharge a student loan after a bankruptcy has taken place rests with the courts - after a bankrupt has ceased to be a full or part-time student. Just because the limitation period has passed (whether it is 5 or 10 years) does not mean the debt will be discharged. The courts are not compassionate to those who: a) they feel have benefitted from the education, b) have received sufficient education which places them in a prospective job market, and; c) who are gainfully employed and earn enough to contribute something towards the debt. The courts will look at your income and determine for themselves what you can contribute. You may feel that there is no ability in such a case, however, the courts have their own measurements in this regard.

The credit counselor/bankruptcy administrator is not telling you the truth about how difficult it is to have student debt discharged. If they were to tell people the real story, then fewer people would go bankrupt. Bankruptcy strives on those who are in debt distress as a result of consumer and commercial debt. Because there are more and more people suffering from both, the bankruptcy administration is less effective.

 The way to approach your problems is to understand what preventative measures can be taken to avoid what you fear most. Your student debt can be controlled - and so can your consumer debts without bankruptcy.

Johnny

 Johnny