Student Loans and Bankruptcy: An Update

Posted in In The News
Posted by J. Douglas Hoyes, CA, CPA, LIT, CIRP, CBV

student-loans-and-bankruptcyMany former students carry a significant amount of student loan debt, and if they have not found a job that pays enough to repay the debt, serious financial problems can result. Unfortunately for some, student loans are a special category of debt in a bankruptcy, and are only automatically discharged if the student loan debt is more than 10 years old.

A private member’s bill was introduced in the House of Commons on October 20, 2004 to reduce the period from 10 years to 2 years. On February 25, 2005 the Second Reading debate was held in the House of Commons. I found the test of the debate fascinating, and I encourage everyone to read the Hansard summary of this debate.

Each party spoke on the Bill. The NDP and the Bloc appear to support the Bill. The Conservatives believe the 10 year period is too long, but believe the 2 year period is too short, so they probably favour perhaps a five year period. They also believe that other changes are required, such as a lowering of the interest rate student’s pay on government guaranteed student loans.

The Liberals created the 10 year period in the first place, so they support the current law, and believe that proposed funding increases and and other government programs will solve the student debt problem.

It is unlikely that this bill will pass before the next election is called, but stay tuned to this blog and our web site and to www.student-loan-bankruptcy.ca for updates as they happen.