Student Loans and Bankruptcy in Canada
As of today there is still no word on when the new rules regarding student loans and bankruptcy in Canada will come into force. The Senate continues to hold hearings on the proposed new rules. It is possible that the Wage Earner Protection provisions will be implemented before the rest of the rules, but that is pure speculation at this point. I can only guess that the rules will be proclaimed into force later this year, but that is just a guess.
So how will you know when the rules do come into force? We have added a form in the top right hand corner of this page. You can submit your name, e-mail address and phone number, and we will notify you as more information becomes available. Don’t worry, I promise not to sell, rent, or disclose your contact information; all you will receive is an e-mail alert as changes happen.
In other news, the fight continues for more fair rules for former students. I’ve been fighting for many years already. (Check out the Office of the Superintendent of Bankruptcy’s web site; in footnote #34 they quote my student loan comments from 2005). In my last blog post about the new rules I discussed my testimony before the Senate Committee on February 7, 2008. You can now view my opening remarks on You Tube:
Other people are fighting as well. On February 27, 2008, Bob Klotz, one of the top insolvency lawyers in Canada, also appeared before the Committee. You can read his full testimony on the Klotz Associates web site.
In his testimony Mr. Klotz agreed with my approach. He said that, referring to the period for discharge of student loans, “we prefer that it be as short as possible.” He then went on to make what I believe was the most insightful comment I have heard on the subject (I wished I had said it myself). He said that reducing the period to two years would be largely meaningless, because with interest relief periods most students would not be going bankrupt that quickly anyway. However:
“We think that if this period was brought down to two years ….it will serve the function as acting as a guide to the courts.”
Bingo. Mr. Klotz is of the opinion, and I agree, that because this rule exists, the courts naturally assume that former students should be treated harshly. This “harshness” effect is caused by the existence of the provision (s. 178(1)(g)), rather than the exact number of years it specifies, and therefore it’s okay to reduce the period. By reducing the period to two years, the courts will be more understanding of the position of former students in financial difficulty, and will hopefully therefore be more amenable to allowing student loans to be discharged without conditions when discharge hearings are required.
Information on Mr. Klotz can be found on the Klotz Associates web site. Information on bankruptcy and student loans, and how to find a bankruptcy trustee in Canada. For e-mailed updates, complete the form at the top of this page, and thanks for reading.
