ADDENDUM

In my previous post, I made reference to a part-time night school course at a local college or university. I clearly stated that this course was not financed by any loans but by a student's own money. I further stated that by taking this course, it would reset the 7 year period for including defaulted and unpaid student loans in a bankruptcy filing.

I am now going to amend my comments which should have been made in my original post.

Paragraph 178(1)(g) of the Bankruptcy and Insolvency Act states that the following debts are NOT discharged when you declare bankruptcy in Canada:

(g) any debt or obligation in respect of a loan made under the Canada Student Loans Act, the Canada Student Financial Assistance Act or any enactment of a province that provides for loans or guarantees of loans to students where the date of bankruptcy of the bankrupt occurred:

(i) before the date on which the bankrupt ceased to be a full or part-time student, as the case may be, under the applicable Act or enactment, or

(ii) within seven years after the date on which the bankrupt ceased to be a full or part-time student.

In summary, government guaranteed student loans are only automatically discharged if you have "ceased to be a full time or part-time student" for more than seven years prior to when you declare bankruptcy.

What does "ceased to be a full time or part-time student" mean? In general, it means that once you leave school, you have ceased to be a student.

A strict reading of the legislation indicates that it is ceasing to be a student that is the critical date.

However, to complicate this discussion, there was a court case in 2005 that addressed this issue ( Re Ledoux 2005, SKQB 75, 8 C.B.R. (5th) 225 ). In this case, the bankrupt left school in 1989 ( her education was funded in part by Canada Student loans). She then returned to school between 1992 and 2000 but did not receive any student loans to return to school. She then went bankrupt in 2004.

The Bankruptcy Registrar ( the judge ) in this case decided that, for the purpose of the student loans, she ceased to be a student in 1989. That was the last year that she was a student for which she received student loans. So, in her case, her student loans were discharged in the bankruptcy.

This case indicates that once you cease to be a student funded by government guaranteed student loans, the seven year period begins. If you return to school but don't get any further student loans, the seven year period does not restart.

Obviously, this is good news for any former students who return to school, and pay for it without government guaranteed student loans.

But first, a word of caution. This case is a case from Saskatchewan. Decisions of the Saskatchewan court are not legally binding in any other province or territory. The courts will typically consider decisions of other courts in other jurisdictions, but they are not legally bound by them.

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Educating one Consumer at a time

Under amendments to the Bankruptcy and Insolvency Act dated September 18, 2009 for individuals making an Assignment in Bankruptcy after July 7, 2008, student debts can be included in a bankruptcy filing providing the student has not attended at a post secondary educational institution on either a full time or part time basis for a least 7 years. However, here is a potential trap.

Let's say that you attended a college or university full time funded by student loans. You graduated in June 2003. Your student loans have now gone into default and remain unpaid. If you filed for bankruptcy in May 2011, these loans would qualify to be included in the bankruptcy estate.

But, let's now say that you decided to take a part time night school course at your local college or university starting in October 2009 and ending in March 2010. This course was not financed by any loans but from your own money. This course will reset the 7 year period starting from March 2010 and your defaulted and unpaid student loans would therefore not qualify to be included in your bankruptcy filing.

If you are seriously considering filing for bankruptcy, unless your student debt is huge and overwhelming or you have other major debts, filing for bankruptcy is a MAJOR mistake. It is only used as a last resort when there is "no light at the end of the tunnel". For starters, a bankruptcy will remain on your credit report for 7 years from the "date of discharge". While it is still possible to obtain credit after being discharged, it becomes very difficult and usually with an extremely high interest rate if you are successful. Almost everyone who is discharged has to start by obtaining a secured credit card which means this requires a deposit to the credit card issuer.

Also, a bankruptcy does not automatically end after 9 months. It simply means that you are ELIGIBLE for a discharge after 9 months. If your Trustee in Bankruptcy, the Superintendent of Bankruptcy or any of your creditors oppose your application for discharge, then you must wait for a hearing before the Bankruptcy Court. That could take upwards of a year or more before the court date.

If you are considering bankruptcy for the sole purpose of walking away from your student loans, you had better THINK AGAIN. This decision should never be taken lightly. If you can somehow manage to find a way to pay down your student loans, even if it takes several years, that is the preferred way to go.

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Educating one Consumer at a time

I heard that now it is possible to have OSAP loans discharged through bankruptcy as long as one has stopped being a student for over 9 years.
Correct?

Under Paragraph 16(1)(k) of the Ontario Limitations Act, 2002, there is NO LIMITATION PERIOD for the collection of student loans that were made under the Ministry of Training, Colleges and Universities Act, ( i.e. OSAP ----
Ontario Student Assistance Program ), the Canada Student Financial Assistance Act or the Canada Student Loans Act.

In addition, starting in 2011, the Province of Ontario will now be starting to pay residents quarterly installments of their Provincial Sales Tax Credit and their Property Tax Credit which were formerly refunded to you by the Canada Revenue Agency when you filed your tax return. The province, in addition to any collection agency collecting on a defaulted student loan, will now withhold these quarterly installment payments until the loan is repaid.

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Educating one Consumer at a time

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I also have a student loan in collections with Patrners in Credit. It was put into default because the RBC erred.

How long does is the statute of limitations on the risk portion in Ontario?

gotta love that logic, mr lemon

If you owe the government, then you owe the government. I don't promote not paying your bills.... However, if a person is in serious trouble, there are other alternatives.

It's never good to scam anyone

What is a reasonable amount? If you borrowed it from a private institution, then all of it. If you borrowed it from the government, then $0. The government gets all its revenue through taxation, which is theft. So the fact that you stole money from the government is actually awesome.

Whatever you do, dont try to "re-activate" this loan by acknowledging it.
There is whats called a "statue of limitations"..google it.
In Alberta, it is two years. Any Debt older than 2 years MUST be DELETED off your credit bureau. END OF STORY

What kind of student loan? Government or private though the bank.

Hi.

I have an old student loan that was with the Royal Bank and it was taken out before 2001. I defaulted on it in 2003 or 2004. I would like to go back to school but cannot get another student loan until, the loan is in good standing.

I believe that the debt is now with Partners in Credit. What is the best way to deal with this? Is there someone who can help me with this?

Will this ever get off my credit bureau?

Thanks. If I try to settle this account, what is a reasonable amount?