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Student Loan Clarification

I have read that a student loan can only be included in a bankruptcy if it has been 10 years or more, but is this 10 years from the date of the last student loan being issued or 10 years from the last day attending school?

I had a student loan 15 years ago. I have attended University as recently as 5 years ago, but I paid for that without a student loan. Will my student loan debt be eliminated?

Also, if an unpaid student loan debt is taken over by a collection agency, is that debt still considered a student loan debt?

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One Response to “Student Loan Clarification”

A licensed trustee said...

Let’s deal with the second part of your question first: if a student loan is transferred to a collection agency is it still considered to be a student loan?

Yes – the fact that a collection agency is trying to collect the debt (even if they have purchased the student debt from a bank or the government) does not chnage the fact that it is a student loan.

The first part of your question is a little less clear: how is the timeline for student loans determined?

The Section of the Bankruptcy and Insolvency Act that deals with student loans is 178(1)(g). It sets two conditions underwhich a student loan may not be discharged by bankrutpcy.

The first condition is that the bankrupt is still a student when they file.

The second is that it has been less than 10 years since the bankrupt ceased to be a full-time or part-time student.

The question seems to hinge on your status as a student. The Act doesn’t say it, but the general interpretation has been “a student continuing the same line of studies”.

By that I mean if you started a BA, dropped out and then went back a few months/years later and completed your BA the clock would start after you completed your BA. (The last day you were registered as a student.)

Using a similar example, if you started a BA, dropped out and then decided to go to college to become a CNC operator they would probably start the clock when you ceased being a BA student (unless you borrowed more student loans to train for the CNC machine).

If there is any doubt as to whether or not your student loans are dischargeable you may ask your trustee to schedule a hearing and allow the Court to decide. Of course to do this you must have already filed bankruptcy and therefore you need to be prepared for whatever the Court might decide to do…

I hope this is of some assistance.