Med School Student Debt: How to Manage It Well and Prosper

Graduating from school is a real achievement. However, this success often comes with a significant financial burden. For medical school graduates, this debt can reach significant sums, sometimes exceeding $300,000.

This article looks at how a consumer proposal can help ex-students, particularly ex-medical students, settle their student debts.

What Is a Consumer Proposal?

The consumer proposal is a legal procedure governed by Canada’s Bankruptcy and Insolvency Act. It gives people in financial difficulty a chance to negotiate a reduction in their debts by proposing a repayment plan acceptable to their creditors. This plan lets payments be spread out over several years, enabling the debtor to lower their monthly financial burden.

The involvement of a licensed insolvency trustee is mandatory for the preparation and filing of a consumer proposal. The proposal comes into effect once it has been accepted by the creditors. His involvement ends direct communication between the debtor and his creditors. They will now have to contact him only.

The Benefits of a Consumer Proposal

Here are the main advantages of a consumer proposal:

Stopping Creditors From Taking Legal Action

Creditors cannot sue or seize a consumer proposal. A consumer proposal usually lets the debtor keep their property and assets. This is true as long as they follow the payment terms.

Fixed, Predictable Monthly Payments

The consumer proposal also allows a repayment plan to be drawn up over a maximum period of five years. Fixed monthly payments facilitate budgeting and help the debtor to have a clear vision of his financial situation.

Pause on Interest

Interest rates on debts stop accumulating from the time the consumer proposal is submitted. Late fees or other debt-related charges are also stopped.

Confidential Process

The details of your consumer proposal remain private in the same way as those of a bankruptcy. An important consideration for physicians.

Why Opt for a Consumer Proposal When You’re a Doctor?

Medical graduates may have two types of student debt. The first is government or government-guaranteed loans, which are non-dischargeable as long as the consumer proposal is filed less than 7 years after graduation. The second is student lines of credit or student credit cards offered by financial institutions, which are not guaranteed by the government.

Although it is technically possible to eliminate the former, it is very rare for the Ministry of Education to agree to a reduction in debt when graduation dates back less than 7 years. On the other hand, all credit facilities, whether lines of credit or credit cards, referred to as “student” by financial institutions, are, in fact, standard lines of credit and cards that can be included in a consumer proposal. It is not always easy to distinguish what constitutes a “student loan” within the meaning of the Act. It is therefore important to consult a licensed insolvency trustee when in doubt, in order to assess each debt correctly.

A doctor can declare bankruptcy in theory. However, this is usually not recommended due to possible consequences. A consumer proposal is therefore a preferable alternative for graduates in this field who are over-indebted.

A physician who declares bankruptcy must notify the Collège des médecins du Québec (CMQ). The CMQ can look at the situation and decide to withdraw their right to practice. This is especially true if their financial problems are linked to their work or raise questions about their judgment or honesty. A consumer proposal generally allows the professional to continue practicing without interruption and without having to go through an examination of the circumstances surrounding their financial difficulties.

The consumer proposal offers indebted individuals the chance to return to a stable financial situation. It is an interesting option to pay off debts and get back on a sounder footing. However, it is crucial not to neglect or underestimate its repercussions, particularly with regard to the credit file.

Physicians considering a consumer proposal are strongly advised to consult a licensed insolvency trustee. The trustee can look at your situation and help you understand what this solution means for you. The team at M. Roy & Associés is available to answer your questions and guide you through the process. Don’t hesitate to make an appointment at our toll-free number 1-877-352-6661 or by filling out our form available online.