If someone filed bankruptcy prior to the 10 year period, can they later be discharged?
Student loans provided through government sponsored programs are not dischargeable in a personal bankruptcy until 10 years have passed. If you file personal bankruptcy prior to the expiration of the 10 year period, it is still possible to apply to the bankruptcy court to have your student loans discharged after the 10 year period.
The key sections of the Bankruptcy and Insolvency Act are 178(1)(g) and 178(1.1) which state:
178. (1) An order of discharge does not release the bankrupt from:
(g) any debt or obligation in respect of a loan made under the Canada Student Loans Act, the Canada Student Financial Assistance Act or any enactment of a province that provides for loans or guarantees of loans to students where the date of bankruptcy of the bankrupt occurred
(i) before the date on which the bankrupt ceased to be a full- or part-time student, as the case may be, under the applicable Act or enactment, or
(ii) within ten years after the date on which the bankrupt ceased to be a full- or part-time student;
178. (1.1) At any time after ten years after a bankrupt who has a debt referred to in paragraph (1)(g) ceases to be a full- or part-time student, as the case may be, under the applicable Act or enactment, the court may, on application, order that subsection (1) does not apply to the debt if the court is satisfied that
(a) the bankrupt has acted in good faith in connection with the bankrupt’s liabilities under the loan; and
(b) the bankrupt has and will continue to experience financial difficulty to such an extent that the bankrupt will be unable to pay the liabilities under the loan.
By virtue of section 178(1.1), the Act has provided the courts with the right to discharge student loans once 10 years have past for a prior discharged bankrupt. The issue becomes what is needed to be demonstrated to the court that the student loans can be discharged.
As outlined in part (a) & (b), there are tests established. In relative terms, the test for good faith under (a) tends to be one that can be demonstrated to the courts satisfaction. The difficult part of obtaining the order is the part that deals with “…and will continue to experience financial difficulty…”. There currently are no rules to what the court is to follow with respect to length of time and definition someone’s inability to pay. To make it even more confusing is that prior court cases have varied depending on City and Province.
The fact is that several people across Canada have been able to obtain a section 178(1.1) order to discharge their student loans. Therefore, we would suggest you speak to a Trustee or lawyer about your situation and options.
I sure hope you are right. I went bankrupt in late 2000. I still have about 65,000 in student loans. I cannot afford to pay them at $16 an hour. I’m trying verious crazy internet marketing schemwes to try to come up with a second source of income. I pay what I can but it grows month by month. I have 8 more months to wait before my 10 years are up. So I wait and pay what I can and wait some more.
I have just over a year before my 10 yrs is up, Im a single mother and financial hardship is a way of life even making a decent wage. How would I go about applying for the discharge of the student loan when my 10 yrs is up? My bankruptcy trustee didnt mention this as an option.
If you were bankrupt before your ten years was up, and now ten years has passed, you should contact your trustee and ask them how you can make an application to bankruptcy court to have your student loan discharged.
If your trustee does not know how to do that (every trustee should know the process), then ask our trustee to refer you to a bankruptcy lawyer in your area who can handle this matter for you. The lawyer can help you make the application to court to have your student loans discharged. It is possible to make the application to bankruptcy court yourself (it’s not that difficult), but each bankruptcy court in Canada follows different administrative procedures, so it is best to get assistance from your trustee, or from an experienced lawyer.
Holy Merry Christmas to everyone who has been waiting for this news
My husband and I claimed bankruptcy in 2005. Obviously, my student loans were not discharged. One loan is in default and the other with bank. It has been over 7 yrs. If the new law comes into effect soon am I able to get the loans discharged? Will this affect my husband? The loans were taken out b/f we met.
For nearly a year I was making monthly payments of $500 to collection agencies for my student loans. My yearly income was just under $24,000 and I had no savings, no assets and my job prospects looked pretty bleak. The collection agencies were constantly harassing me and despite my huge payments I wasn’t making a dent on the principle. I was merely paying to keep them from taking me to court. The big surprise was that I was only paying for two of the three portions of my student loans. The agencies had never clarified that my loan was split into federal, provincial and the bank’s risk portion. So at any given time I was making payments to only two of the three portions. In my darkest hour I filed a consumer credit proposal. In the short term things improved. My income increased and I wasn’t accruing additional interest fees. The phone calls had stopped. And eventually I moved into an apartment with a room mate to reduce my monthly expenses. Then I got a promotion. Then I was laid off when my company restructured. Knowing how important it was to meet all of the requirements of the proposal I did everything that I could to make every payment. Even during the two years I worked in the cruise ship industry I was diligent about sending money home for these payments. Often paying a huge currency conversion fee and wire transfer fees. In November of 2007 I completed my consumer credit proposal. I received a certificate and suggestions on how to rebuild my credit. Then the calls began again. You see my consumer credit proposal came up short of the ten year period. The proposal ended in November of 2007 and I didn’t reach ten years until April of 2008. That five month difference made all the difference in the world. The phone calls have begun again and they aren’t just asking for the difference between the principle and what I paid in the proposal. Partially because part of what I paid went to the trustee and not the creditors. So now they are still demanding full payment of two thirds of the total claim in the proposal. Bad, bad phone calls. So now I am waiting to hear back from a lawyer that was suggested by my trustee. Hopefully this lawyer will be able to have the debts discharged as part of the proposal. The problem is that three months ago I returned home from the cruise ship industry for a new job. My new job actually pays a reasonable salary and I haven’t moved into my own place yet. My relatives are letting me stay with them until I get settled again. So how do I go to court and explain that this huge debt is unfair and has caused me hardship when I have this great new job and currently have very few expenses? It’s not like I can commit to huge monthly payments. My relatives don’t plan on supporting me for the next 24 months! It’s not certain how the new changes will affect people like me. Of course I understand there are others who are suffering real hardship. And they are supporting families, but this has been a ten year nightmare that won’t go away. For the record the trustee of my consumer credit proposal has been excellent. And the financial advice regarding managing my monthly expenses was really good. No complaints at all with how they have treated me.
How does the new seven year rule affect me? My consumer credit proposal was completed in November of 2007 only a few short months away from the ten year period for student loans. Can the remaining debt now be discharged as part of the consumer credit proposal? Or must I now file a separate motion with a lawyer or file for bankruptcy?
I was discharged in 2005. I am not applying to my student loan included in that bankruptyc.
The lawyer wanted $2500 to do it.
I called the court house and the lady in the bk office told me exactly what i needed to do, and even faxed me copies of examples.
basically you have to 1) write a notice of motion and send that to the loan holders (national student centre, government) 2) write an affidavit of facts (get it notorized), 3) write a affidavit of mailing (get it notorized). drop a copy of the notice at the office of the superintentant of bk, and then take one of each to the court with ten dollars and schedule the hearing. mine is on dec 3. if you are interested email me at mike3776@hotmail.com
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