Student Loan Bankruptcy -- Is is all About Timing?

Some people think you can’t discharge Canadian student loans with bankruptcy anymore.

Wrong – if you’ve been out of school for a certain time period.

This time period keeps changing. It changed from no waiting time at all to two years out of school. Then it went up to 10 years. And now it’s down to 7 years – or five in certain cases.

Canada’s student loan bankruptcy rules are found in Section 178 1(g) of the Bankruptcy & Insolvency Act. If you want more detail, here is a link to the entire Act.

Under the latest rules, government student loans can be discharged in a bankruptcy if former students have “ceased to be a full- or part-time student” for more than seven years at the time they declare bankruptcy. Or make that five years -- if the court is satisfied that they showed good faith and face such financial difficulty that they're unlikely to be able to pay in future.

Different court cases have produced different interpretations of how to measure this time period. Find out more in Debt 101’s new Q & A on Student Loan Bankruptcy (Basic), our first interview with well-known bankruptcy trustee Douglas Hoyes.

You can also read other Debt 101 articles about Canada’s student loan bankruptcy, such as: New Student Loan Bankruptcy Rules Shorten the Wait and Bankruptcy – the Real 7-Year Rule.