Can Canada Student Loans Object to Your Bankruptcy Discharge?

The short answer is yes.  In fact, anyone can object to your bankruptcy discharge.  Whether or not that objection will be successful is another matter.

In a recent court case in Saskatchewan (full citation: Funk, Re (2014), 2014 SKQB 236, 2014 CarswellSask 498, C. Elaine Thompson Reg. (Sask. Q.B.)), Canada Student Loans objected to the discharge of the bankrupt.

Of interest is that, at the time of the bankruptcy, the bankrupt had ceased to be a student for 7 years and 4 months, so her student loans were eligible to be automatically discharged.  The trustee agreed, and did not object to the discharge.  Canada Student Loans objected, stating that the bankrupt should be required to make additional payments.

Fortunately for the bankrupt, the judge disagreed, and the bankrupt was granted an absolute order of discharge.

In this particular case the bankrupt did have a job after graduation and did make payments on her student loan, but then experienced a series of unfortunate events, including the loss on the sale of a home, and subsequent medical issues.

Canada Student Loans testified to the Court that the bankrupt “has brought on or contributed to her bankruptcy by rash and hazardous speculations, by unjustifiable extravagance in living…”

The judge disagreed.  He believed her expenses were reasonable.

In this case the court agreed that the bankrupt did everything she could to deal with her student loan.  She made payments, but her medical condition and other issues made it impossible for her to repay the loan, so she declared bankruptcy.  In this case the system worked.

The creditors have the right to object, but as a bankrupt you can tell your side of the story, and the court will generally make a reasonable decision.

Published on Tuesday, September 23rd, 2014