Canada Student Loan Bankruptcy Legislation

As you are all aware, on December 14, 2007 the new bankruptcy rules, including the new student loan bankruptcy rules in Canada, received Royal Assent, but as of today they have not yet come into force, and the coming into force date has not yet been announced.

I have no idea when the new student loan bankruptcy rules will come into force, but I am happy to provide my best guess. Please note: this is just a guess on my part; the government has not yet announced the implementation date. When they do, I will post it here. To be notified immediately, please complete send in your e-mail address on the form to the right of this page. I promise I will not sell or use your name or e-mail address for any purposes other than to notify you of changes to the legislation.

So, here’s my fearless prediction:

The new student loan bankruptcy rules will come into force on November 1, 2008.

Why did I pick November 1? Here are my reasons:

First, The Senate Standing Committee on Banking, Trade and Commerce has completed it’s hearings on the new legislation. The last hearing was held on April 3, 2008, and no further meetings are scheduled. Since Parliament rises for the summer shortly, it is unlikely that the Senate will hold further hearings, so there are no Parliamentary reasons for the implementation of the legislation to be delayed.

Second, November would be a good time of year to have the new rules implemented. It gives the government the summer and early fall to get ready, and avoids a later implementation in December or January over the holiday season.

Third, a new Superintendent of Bankruptcy, Mr. James Callon, was appointed effective March 12, 2008. A November implementation deadline will give Mr. Callon sufficient time to become familiar with his new role, and to assist with the implementation of the new rules.

Fourth, historically, it is very unusual for legislation to come into force more than one year after it is given Royal Assent. Government officials require time to implement the new regulations, but it would be very unusual for the government to require more than one year to implement the changes.

Fifth, I have received confirmation that the Office of the Superintendent of Bankruptcy (“OSB”) and the Department of Justice Canada have drafted the regulations and forms that will accompany the new Wage Earner Protection Program, as well as the amended provisions of the Bankruptcy and Insolvency Act (“BIA”) and the Companies’ Creditors Arrangement Act (“CCAA”). OSB officials are currently amending and drafting the directives what will accompany the same legislation. The Directives are often the most important part of the implementation plan, because it’s the Directives that contain specific guidance on how the new rules will be implemented.

Finally, it is likely that the new Wage Earner Protection Program will be implemented before the changes to the remaining legislation are implemented. The WEPP protects workers if the company they work for goes bankrupt, so even though the WEPP will impact on far fewer people than will changes to the BIA, it is politically expedient for the government to implement the WEPP changes first, so that they can take credit for helping workers in the event that an election is called in the near future. As a guess, it is possible that the WEPP will come into force around September 1, with the remaining changes implemented in November.

Again, let me emphasize that there has been no official announcement from the government indicating when the new rules will come into force. As stated above, I am merely guessing at a November 1, 2008 implementation date. The date could be earlier, or later.

What does this mean to you?

If you, or someone you know, is experiencing financial difficulty, you should consult with a licensed trustee in bankruptcy to assess your options. If your student loan debt is manageble, they may suggest credit counselling or a debt consolidation loan. They may suggest that you file a personal bankruptcy or a consumer proposal before the new rules come into force, or in your situation waiting may be the correct answer. Either way, contact a Canadian bankruptcy trustee, licensed by the federal government and offering free initial consultations, for a review of your situation. I’ll post more when more information is available.