Student Loans and Bankruptcy

(new filings on or after July 7, 2008)

Hardship Provision

If it has been five or more years since you ceased to be a full- or part-time student, and you are or have been bankrupt, you may make an application to Court for a discharge of your student loan debts under the “hardship provision.”

The Court will only discharge your student loan debts if it is satisfied that you acted in good faith in connection with your obligation to repay your student loans, and that you have experienced, and will continue to experience, financial difficulty that prevents you from repaying these debts. The Courts also look at how debtors used student loan money, their efforts to complete their educational program, their efforts to repay the loans and their use of available interest-relief programs when considering the question of good faith.

Seven-Year Rule

If you declare bankruptcy seven or more years after the date on which you ceased to be a full- or part-time student, your student loan debts will be eligible for discharge along with your other debts.

Retrospective application of the Seven-Year Rule

The Seven-Year Rule is said to be retrospective. What this means is that the new Seven-Year Rule also applies to bankrupts who were not yet discharged on July 7, 2008.

Note: When you ceased to be a full- or part-time student is governed by the federal or provincial student loan legislation applicable to your loan.