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Discharging Student Loans

Updated: May 29, 2020

Written by Kelli Day

Black & Associates

These days, the pursuit of higher education is one of the most significant investments that an individual can make. This investment is significant in terms of the time and dedication required in order to learn a new set of skills, but it is often most impactful in terms of the associated financial burden. Unfortunately, many people are unable to keep up with their day-to-day living expenses while also maintaining onerous student debt repayment obligations. While making an assignment in bankruptcy may provide a fresh start in relation to certain consumer debt, there are special provisions of the Bankruptcy and Insolvency Act (“BIA”) that give student debt a special status.

Specifically, the BIA states that an order of discharge does not release the bankrupt from 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 occurred within 7 years of the date where the bankrupt ceased to be a full- or part-time student. This means that student debt must be repaid even though a bankrupt’s other debts are released at the time of discharge.

However, the BIA does provide an avenue for relief for certain bankrupt individuals with student loan debt who meet the following requirements:

(1) The bankrupt has acted in good faith in relation to their student loan debt; and

(2) The bankrupt has and will continue to suffer financial hardship such that they will not be able to repay the debt.

This is an important exception to the general rule that student loan debt survives a discharge from bankruptcy. It is designed to assist individuals who have done their best to make their scheduled payments as required, but have experienced hardships outside of their control which make them unable to continue doing so.

In order to receive the benefit of this exception, the Court must be satisfied that each of the above criteria are met based on the available evidence.

Our lawyers have experience providing advice and representation to clients that are considering seeking a discharge from their student loan debt. If you or a family member has questions regarding this process, we would be pleased to hear from you.

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