Can Student Loans be included in a bankruptcy in Canada if the bankruptcy happened before the seven years was up?

I don’t normally answer questions directly in this blog, but here’s a comment that was posted on one of my blog entries; it’s a good question, so I am going to answer it in this blog. Here’s the question:

I filed bankruptcy in Canada in 2010 and was discharged in that same year. However, because my student loans were only 4 years old at the time of my bankruptcy (I left school in 2006), my student loans were not discharged.   I currently owe with interest $25,000 in student loans ($15,000.00 in Canada Student Loans). Is there anything that I can do to get rid of these student loans? It is very frustrating because the course that I took that led me to this student loan has never landed me a job in that area.

The answer is that yes, it is possible to go back to Bankruptcy Court and make an application to court to have your student loans partially or fully discharged, even if they were not discharged in your original bankruptcy.

To do this it must be at least 5 years (under the hardship provision) since you were last a student. In the question above it appears that you have been out of school for longer than five year, so it appears that you easily meet that condition.

Second, you must convince the court that continuing to pay the student loans is causing you undue hardship. The fact that you have not been able to find a job in your area of study will help your case. You will also have to demonstrate that you have looked for a job, but the jobs you have are not sufficient to allow you to repay the student loan.

You should probably also demonstrate to the court that you have attempted to refinance your student loan through a debt consolidation loan, or make other repayment arrangements.

To make an application to court you should contact your trustee for guidance. Depending on where you live they may refer you to a bankruptcy lawyer for assistance.

If the court rejects your application, it may be possible to file a consumer proposal as a means of discharging your student loans. You should contact a trustee for further information.

Published on Tuesday, September 4th, 2012