Many graduates find themselves with tens of thousands (sometimes hundreds of thousands) of dollars of debt to go with their new educations. It can make graduation a time of anxiety instead of joy — What if I can’t find a job in my field? I won’t be able to afford a car or a home. How will I ever pay it all back?

If you’re struggling with government-secured student loan debts, the only options available to you within seven years of graduating are to contact the lender and try to negotiate a lower payment or to enlist the help of a licensed administrator to prepare a consumer proposal on your behalf, which is also a negotiation between you and your lender, but one you don’t have to undertake alone. (It has the added benefit of taking into account any other unsecured debt as well.) Any time you’re struggling with debt, it’s a good idea to meet with a credit counsellor to discuss your options.

If you’ve been out of school for more than seven years, though, bankruptcy may be an option. Any less, and your government-backed loan won’t be automatically discharged in a bankruptcy situation like your other debts.

(Remember that it’s always a possibility that any creditor may oppose your bankruptcy or your discharge, and that includes the government.)

Of course, if you have other debts increasing the pressure, reliving them through bankruptcy may still be the best option for you, as it will free up your income to pay off your student loans, but bankruptcy is a serious step that should be undertaken only after sufficient discussion with a qualified professional.

The Bankruptcy & Insolvency Act states that at any point from five years after leaving school, if you are believed to have acted in good faith and are in financial hardship (i.e. if it’s determined that continued repayment of the loan would make you experience financial difficulty), your debt may be eligible for discharge in bankruptcy, but will not necessarily be automatically discharged.

Good faith essentially means that you used the loan funds as they were intended, made reasonable efforts to repay them, and that you took reasonable steps to take advantage of lender offers of interest relief. The court may decide to let you take advantage of the five-year rule especially if you unable to work in your field after graduating (i.e. you are not deriving the economic benefit of your education), or if you left school for medical reasons without graduating.

Even if you successfully declare bankruptcy, you may still be required to make regular payments on your student loan as a condition of discharge.

These rules apply to government-backed loans. Private loans from other lenders abide by the same rules as any other unsecured lender, which means you can include them in a bankruptcy proposal at any time.

A bankruptcy that includes student loans can get complicated, especially if you’ve returned to school since graduation, so it’s always a good idea to talk to a qualified professional, like those at GTA Credit Solutions.