New Student Loan Bankruptcy Rules Shorten Wait

Canadians overwhelmed by student loan debt have been granted a three-year break.

On July 7, 2008, Minister of Labour Jean-Pierre Blackburn signed an Order-in-Council permitting automatic discharge for student loans in bankruptcy after seven years.

An existing rule requiring a 10-year wait had been on the books since 1998. The 10-year rule led to charges of discrimination and a legal challenge.

Early in 2008, the Canadian Senate heard testimony about the consequences of the 10-year wait. It then recommended a reduction to five years. However, the federal government moved that up to seven years, with a potential two-year reduction for 'special cases'.

Under the amended regulations, discharge of student loans will be allowed after five years if the court decides that the applicant would undergo extreme hardship if required to wait seven years.

The length of wait refers to the time since the applicant last attended school, and not to the age of the student loans in question.

For more details, use the links below!

LEARN MORE ON DEBT 101:

FAQ: Can I go bankrupt on my student loans…

Money Theatre: Canadian Politics: Testimony on Student Loan Bankruptcy Rules

Useful Links: Bankruptcy Information

MORE POSTS IN DEBT 101 BLOG