As many of you are no doubt intimately aware, there is a looming student debt time bomb, which, in Canada, was made worse by the government’s removal of the option of bankruptcy for 10 years in the late 90s. However, as recently as July 7, 2008, there are new student loan bankruptcy laws. The two major changes are that the waiting period that one has to sit out since last being a full time student and also a so-called “Hardship Provision”. Canadian student loan debt will now be eligible for discharge to be included in a bankruptcy if seven consecutive years have passed since the student ceased to be a full or part time student (in section 178(1) (g) to not include periods of time when the bankrupt was a student but received no student loans).
For a student debtor to be able to take advantage of the hardship provision, they may apply to the court to obtain a discharge of their outstanding Canada student loan debt after only five years. For the court to agree to the dismissal of the loans on hardship grounds, the former student must make the argument that they have, a) acted in “good faith” and b) that they are expected to continue to experience financial difficulties for the foreseeable future. It isn’t really clear what constitutes acting in good faith other than something obvious, like that the student tried to make some payments. It may be a lot more evident with regards to some of the factors that could constitute one’s being expected to continue to experience financial difficulties for the foreseeable future:
- Being an older worker, one is disadvantaged and likely less competitive in the job market
- Having a disability that is expected to stay with one for the foreseeable future, especially if it has been documented before one went to school. Anything like a mental illness to a major physical illness that could be a barrier to employment could help your argument
- Having disproportionately burdensome debtload for a degree that’s not very competitive. For example, I have known several people who have $60k+ debt for Master’s Degrees in Liberal Arts, “Women’s Studies”, philosophy, etc. These degrees, one could argue, are not as easy to capitalize on as say, math, science, or health-care fields of study would be
- Having had a spotty or inconsistent employment record, where it can be clearly demonstrated that the former student did not receive any substantial financial benefit from their degree
- Making the argument that one is expected to have an ongoing financial difficulty could also be helped if one has no family to help them and can demonstrate that the payments alone would constitute undue hardship
- Generally, being able to make a sound argument that you have not received any financial gain from your degree
Attached is a Canada Student Loan Hardship Package which contains all the forms (Education & Employment Information, Financial Questionnaire, Medical Certificate and another to verify income) you need to fill out and submit to apply for forgiveness for your outstanding Canadian student loan debt, which is causing you undue hardship.
. Canadian student loan debt will now be eligible for discharge to be included in a bankruptcy if seven consecutive years have passed since the student ceased to be a full or part time student (in section 178(1) (g) to not include periods of time when the bankrupt was a student but received no student loans). Women’s Studies