Canada Student Loan Bankruptcy Legislation

For those of you who are new to this blog, here is an update on where we are at: Currently you must have “ceased to be a student” for ten years in order for your student loans to be automatically discharged if you declare personal bankruptcy in Canada. Virtually everyone agrees that forcing former students to wait ten years before getting relief from the bankruptcy process is unfair.

On November 25, 2005 the government, realizing that an election was about to be called, encouraged the House of Commons and the Senate to pass, without debate, what was then known as Bill C-55, now known as Chapter 47 of the Statutues of Canada. You can read Chapter 47 here, or download a pdf copy of Chapter 47 here .

So what was the problem? Because Bill C-55 was passed with virtually no opportunity for corrections or changes, then Liberal Industry Minister David Emerson advised the Senate Committee on Banking, Trade & Commerce that the new rules will not come into force before June 30, 2006 to allow the Senate to review the Bill and make changes. Click here to read the letter from Industry Minister David Emerson.

Unfortunately new bankruptcy legislation is not a priority in Canada, so progress has been slow.

On December 11, 2006, The Minister of Labour, Jean-Pierre Blackburn, tabled in the House of Commons a Ways and Means motion to introduce an Act to amend the Bankruptcy and Insolvency Act, the Companies’ Creditors Arrangement Act, the Wage Earner Protection Program Act and chapter 47 of the Statutes of Canada, 2005. This Bill was known as Bill C-62. The Bill was passed at Third Reading by the House of Commons on June 14, 2007, and received First Reading in the Senate on the same day.

However, the Bill died when Parliament was prorogued on September 17, 2007, ending that Session of Parliament.

But wait! All is not lost. On October 29, 2007 the government introduced Bill C-12, an exact copy of the previous Parliamentary session’s Bill C-62, and the Bill had three readings and was passed on October 29 and referred to the Senate.

First Reading was held on October 30, 2007 in the Senate, and Second Reading happened on November 15, 2007; you can read the Senate Debate here.

The Bill has now been referred to the Senate Standing Committee on Banking, Trade and Commerce for detailed review. The first Committee Meeting is scheduled for November 29, 2007.

How long will Senate Committee hearings take? No-one knows, but it would appear that hearings will last until at least February, 2008, so it is possible that the Bill, with amendments, if any, will be referred back to the House of Commons in March, 2008. If all goes well, the Bill could be passed as early as March, 2008. It is possible that the new rules could be in place as soon as March, 2008, but it is more likely that a transitional period will be imposed, so it is more likely that implementation of the new rules could happen on July 1, 2008,or September 1, 2008, or even January 1, 2009. As you can see from the history I have presented, these are purely guesses on my part. We have a minority government in Ottawa which could fall at any time, so stay tuned to this blog for updates as they happen.

If you are a former student and are suffering under a burden of student loans, I suggest you contact a licensed bankruptcy trustee for a free initial consultation to review your situation.

Stay tuned…….