student loans
i was under the assumption that student loans could not be written off if you claimed bankruptcy.
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i was under the assumption that student loans could not be written off if you claimed bankruptcy.
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).
In some instances, if student loans do not make up the majority of your debt and you are nearing the 10 year mark, you may be able to file a consumer proposal that will finish after the completion of the 10 year mark and within which these student loans will be cleared. However this is a complicated scenario and highly dependant on timing so it would be important for you to contact a trustee in your local area to discuss the details.
The Section of the Bankruptcy and Insolvency Act that deals with student loans is 178(1)(g). It sets two conditions under which a student loan may not be discharged by bankruptcy.
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.
Now there are some changes in the works. Bill C-55 will reduce this 10 year rule to 7, for more details about how and when this will come into effect please visit our student loan blog or contact licensed trustee.
I hope this is of some assistance.
I am sorry, but right now I don’t have any good news for you.
The 10 year clock for discharging student loans starts the day after your last day as a student. It doesn’t matter that you didn’t borrow any more money in your last 2 years of school – if your studies finished in 1998 then your student loans aren’t dischargeable until 2008 under the current law.
In addition, they would only be automatically discharged by your proposal if they were already 10 years old when you started your proposal.
On a more positive note: when your student loans get to be 10 years old you have the right to apply to the Court to have them retro-actively discharged by your proposal. So, in 2008 hire a lawyer and go to Court and ask that your student loans be discharged at that time. You will have to prove to the Court that you are unable (at that time) to repay the debt and the bank and/or the government have the right to appear in Court to dispute your claim, if they want to.
Keep an eye on the news services – at some point Bill C 55 may actually become law and then the period for discharge will be dropped to 7 years.
The 10 year rule is measured as of the end of the month you last attended school. Therefore, if you last attended school on September 12, 1997, then the earliest you could be cleared from these loans in bankruptcy would be Oct. 1, 2007. It is important you get the time frames correct as even being off by as little as a day could mean the difference between your student loan being cleared or not. For more information about student loans you can reference our student loan blog as it may prove useful.
In some instances student loans can be written off.
The Section of the Bankruptcy and Insolvency Act that deals with student loans is 178(1)(g). It sets two conditions under which a student loan may not be discharged by bankruptcy or a consumer proposal.
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 attended school (either full or part time).
To determine how your student loans will be treated it is best to contact a licensed trustee directly and he will be able to help you determine whether filing a bankruptcy or proposal will have any impact on the student loans in quetion.