The new bankruptcy laws, which were rushed into law on November 25, 2005, just before the defeat of the Liberal government on November 28, 2005, will not come into force until June 30, 2006 at the earliest. The Senate was promised the opportunity to review the legislation and hear the scores of experts and special interest groups who were scheduled to make submissions. There is the hope that this flawed legislation will not be enacted without significant changes.
The new law, which passed on November 25, 2005, states that student loans will be eligible to be written off in a bankruptcy if the student has terminated his studies seven or more years ago. This is a decrease from the current ten-year wait. In cases of undue hardship, a bankrupt may apply to court to obtain a discharge of the student loans after five years.
I am opposed to this law for three main reasons:
1. The law is discriminatory and draconian. It is also in violation of one the major tenets of Canadian bankruptcy – that an honest but unfortunate debtor deserves a fresh financial start. Students are the only people who go into bankruptcy and cannot get their dischargeable debt erased in 9 months like all other debt. A person can owe CRA tens of thousands of dollars because of a failed business or because they didn’t pay their income tax. These people are eligible to have their debt erased in nine months but not students for their debt.
2. The law penalizes students for youthful mistakes. Most people think students should pay a severe price for not paying back their students loans because they think the student has now got a good education and can earn significantly more money because of their education. If this were the case I too would want stringent penalties placed on these students.
The reality is quite different. In my practice the vast majority of students who wanted their student loans erased in a bankruptcy were students who did not get a good education that would earn them significantly more money. They either got degrees like a BA which did not qualify them for any additional monies or more commonly they did not finish their studies. Many of the people I saw took hair dressing courses and courses to work in the hospitality industry. This qualified them for jobs paying minimum wages.
Did these students make mistakes? Yes, they did. Perhaps they were too optimistic about their job prospects. Perhaps they didn’t work hard enough to pass their studies. Perhaps they didn’t stop to think that when the course was finished they would only be qualified to make minimum wages. They made mistakes but isn’t that what youth is all about? As young people we have all made mistakes but we learned by our mistakes and moved on.
3. The penalty for students is too severe. It is a legal maxim that the punishment should fit the crime. The vast majority of people with hardship student loans don’t have the income to pay back their student loans. These people are hounded by bill collectors and are under threat to have their wages garnisheed.
Some are forced to work in the underground economy where they do not pay income taxes. Some had to leave the country to find work where they would not be harassed by bill collectors. Many never get the chance to build a financial life and build for their future.
I favour the recommendation of the Canadian Association of Insolvency and Restructuring Professionals; CAIRP, that calls for the court to have the authority, at the discharge hearing to grant full or partial relief.
The Report of the Senate Committee on Banking, Trade and Commerce November, 2003, recommended that the wait before student loan debt could be discharged in a bankruptcy be reduced, to five years following the conclusion of full or part time studies.
Hi. I would like to say that I graduated in 1999 from a local computer school. To make a long story shorter… after I received my diploma in the mail (IT Analyst), I immediately put my resume online. 2 companies from Dallas and San Fransisco wanted to hire me, but they required that I produce a transcript of my marks which I hadn’t received from my school. I emailed the same name which is signed on my diploma; I was told that they didn’t have enough tests to complete a transcript. This was very odd to me considering I had some tests which didn’t stay with the school once I left – where were all the others??
Years later after several failed job attempts, I emailed the school again asking for my transcripts. They never replied, and they now go under a different company name. You can imagine how many bill collectors are now calling me.
The fact is that I seem to have received an honorary diploma which can not present me with a job oportunity, but I still owe thousands of dollars. Minister of Education wrote me stating that there were no provisions/restrictions regarding these schools’ transcripts and diplomas. *Aren’t these 2 items the most important parts of going to school??
This new 7 year rule has helped me make a hard decision – I unfortunately am going to have to declare bankruptcy this year.
What a waste.
Sincerely,
Jim
In 1996 I finished an aviation program In Quebec from a private college at a cost of $41,000. The collge called C.E.S.P.A. told students that were signing agreements with aviation companies in the province as part of their job placement program.
Another lie this college made to students is that the Quebec Ministry of Education was supposed to provide up to $20,000 in bursuries and the balance in loans. This also never materialized!
Half way through the program the Ministry of Education changed their mind! At this point students protested and CESPA college recieved much bad publicity in the french media. I tried to salvage my training by using the balance of the loans to pursue my education in the United States which offered better program which included an inbternship to build my flight time, but the Minister of Education at the time Pauline Marois refused the request.
This avaition school lasted only 4 years and went under! In my opinion the Ministry of Education sponsored a fraudulent private entity, and the students foot the bill!
I finished the program and tried to find work with no hope.
I began a new career as a financial advisor, but now that career is threatend , when I declare bankruptcy this summer!
I asked for a Partial Remittance of $20,000, but the Minister of Education Jean-Marc Fournier refused.
The constant discrimination I have witnessed simply makes me feel that I live in a fascist society, not a free society.
Similar stories here… I have been lied to by government and the private companies that manage the loans. I was told that I had six months after school before I needed to make payments. What they didn’t tell me was they started charging interest during that period. Then they tacked that interest amount on the principal because I didn’t have the money to pay it. Interest on interest… they are thieves, nothing less.
In 2003 I requested options for lowering my payments. I was succesful and cut one of payments by almost half. What I wasn’t told was that I was making interet only payments. Money thrown away. Not one dime off the principal.
I make four different payments thanks to the government bouncing the loans from institution to institution from 1997 until 2002. When I applied for interest relief to one of the companies, they took into account only their loan portion of $260. They did not consider that in total I pay $600 a month. I was refused. I was hanging on by a thread sacrificing meals for my debt and I had enough. I left Canada. A country run by such inconsiderate thieving liars does not warrant me paying any tax dollars to them at all. Maybe I should have committed a serious crime. My education would have been free, and seven years after my pardon I wouldn’t have a criminal record. Now I have 7 years before I can apply for bankruptcy and then if I can’t make the payments another seven before my record is cleared.
I will return when I see that the Canadian government treats its young and its non-corporate citizens fairly. The burden they put on people pursuing a better life is incomprehensible. The demographic that requires the most flexibility under law is given the least.
Something is changing…
I filed in October of 2005. I have two student loans from 1998 — a Manitoba and a Canada. They were both in collections. My trustee added the loans onto my forms to make sure our Ts were crossed, with the understanding that they would not be part of my dischanrge.
Guess what? They are part of my discharge!!! Student loans included them in my bankruptcy. What the heck? Has anyone else heard of this yet, or is it because the loans are so old?
Hi:
I too am in debt up to my eyeball. When I finished UniversityI couldn’t find a job to save my life so I painted, and made enough to get by. Not only did I paint, I cleaned houses that had been through fires, looked after a not so nice old lady painted some more and then finally got a job (4 days a week, 3 in the summer.) This was some 6 almost 7 years ago. My student loans are so astrinomical that my negotiated payments done through a government agency don’t even cover the interest. So my debt grows and grows. I have made choices not to do things in my life because of this debt, I mean big things like have a family, because I don’t see an end in sight. I may have made some bad judgement calls I am not sure but I feel that I continue to be punished for this year after year. How do you get a Trustee, Dawn? let me know.
hi there!
To answer why Dawn was excused from her student loan from 1998. I filed bankruptsy for student loans in 1998. It was just a few months before the law stoped including student loans in bankruptsy. I think the law for declairing student loans changed in October 1998.
I know people who want to file for bankruptsy for their student loans and they can now do it again.The new law, which passed on November 25, 2005, states that student loans will be eligible to be written off in a bankruptcy if the student has terminated his studies seven or more years ago. This is a decrease from the current ten-year wait. In cases of undue hardship, a bankrupt may apply to court to obtain a discharge of the student loans after five years.
To Dawn & Dyannamac;
Just so I understand correctly, Dawn filed for bankruptcy last fall and it wiped out any loans before the 10yr rule in October 1998? Have I got it right? Does this mean that anyone who got loans prior to the 10yr rule in 1998 can have them wiped out in bankruptcy? Someone please tell me this is TRUE…. I’m on year seven waiting for this bull to be over…
Dear Julie
It looks like finnaly your nightmare is over. If you had a student loan prior to 1998 and you claimed for bankruptcy BEFORE the new law came in to effect which was 1998 it would have been dismissed BUT after 1998 you can now follow the new law of Nov 25/06. Your loan can be included in banckruptcy after 7 years. So if your loan is 7 years old you can apply to have it wiped out. If you have undue hardship you can ask for a discharge after only five years.
I have a friend that is going to apply for the 5 year plan next month. I will let you know how it goes.
You are on your way to freedom.
All: The facts on student loans and bankruptcy as of this date (May 24, 2006) are as follows:
1) The new laws passed on November 25, 2005 have NOT been enacted and therefore are NOT in effect. The new laws are on hold and no one knows when or if they will be enacted. Please refer to:
http://www.bankruptcycanada.com/blog/canadian-bankruptcy-reform-on-hold/
2) The current law of the land is that before a person can erase student loans in a bankruptcy the person will have to have been out of school for 10 or more years.
For up to date information on student loans please see the following link:
http://www.bankruptcycanada.com/studentloans1.htm
Your truly,
Earl Sands,
Trustee in Bankruptcy
To whom it may concern:
I became a Canadian citizen over 2 years ago and have recently suffered a financial setback. I owe $20,000 in unsecured credit card debt and over $100,000 in student loans that I borrowed while a U.S. citizen. Are the U.S. student loans, owed to The U.S. Department of Education, dischargeable under Canadian bankruptcy laws? (IT HAS BEEN OVER 10 YEARS SINCE I STOPPED ATTENDING SCHOOL)
With kind regards,
senatorralph@hotmail.com
Ralph: The US Student loans will be discharged in a Canadian Bankruptcy so far as the laws of Canada are concerned. The US student loans cannot pursue you for collection in Canada once you file bankruptcy.
However, the loan will NOT be erased in the US so if you move back to the States the student loans people can pursue you for collection.
Hi I had arun in with once of these dam so called learning centres that seemed ta pop up everywhere over night years back ,The one I dealt with was Accademy Of Learning,Anyway I registered got student loan to attend and went 1 day and realised it was a scam and not a program I wanted to be in debt for the rest of my life as employment after this program might get you a minimum paying job,Anyway I gave them a letter stating I wanted to quit and wanted my student loan returned to the rightful owner( the Government)) now when you went to this school you had to sign in everyday so theres attandence records,but you could imagine my suprise when 4 years later Iam being hounded by bill collectors stating I owe almost 6 thousand dollars for a course that Iam being told I completed according to what the Accademy of Learning told the government,to make a long story short I have proof I was not attending this course when the school says I did and Iam being told by the government Iam reliable for the money and must sue the school to recoupe the student loan money that was payed to them9Anyone got any suggestions where i go from from here I just recently was married now my wife gets bill from government saying she owes my debt and I just was layed off and now Iam told they will take half my uic benifits how the hell am i supposed ta live and support a family any help would be appreciated you can email me directly at scamp36@hotmail.com thks
I have been out of school for 10 years now, and I have never held a job which allowed me to simultaneously live and pay back anything on the loan. I don’t make terrible money, but not enough to afford both.
I was under the impression (until visiting this page) that student loans were not erased when you declare bankruptcy. Apparently this is wrong. I don’t have any credit cards, and nothing in my name, and I’m now 31 and eager to buy a house, start a family, etc.
Am I to understand that as of this date I could apply for bankruptcy, have the loans eliminated, and start rebuilding my credit?
Actually, I redid the math and I’ve only been out of school for 5 years (See? My schooling was THAT bad). However, if the new law (passed in November of 2005) is stating that I have a seven year wait (as opposed to ten) I’ll likely pursue Bankruptcy in 2008.
I’m a little confused.
I completed my undergraduate work in 1996, and ended with a fairly large loan. I went on to complete graduate work, but did not take out any loans for my MA. If I file for bankrupcy, would my undergraduate loans be erased, even though I graduated from part time graduate studies in 2002? What is considered the end of my studies – the studies for which I withdrew a loan or when I actually finished my studies (but didn’t borrow any $$)?
Jennifer
Jennifer: If you wish me to answer this question please post it on the “Ask a Trustee” forum:
http://www.bankruptcycanada.com/blog/ask-a-trustee/
Re: my statment mabe on March 14th, 2006 at 3:12 am: Well, it’s now October, and still we wait to hear about this new reform which was RUSHED into effect. lol It will be 10 years for me soon so it won’t apply to me before too long. Too bad the past 5 years have been sheer hell for me.
Thanks a lot NB Governement for regulating private schools and colleges. Not. If people did their research to see how our Government actually regulates(or rather doesn’t regulate) these schools with regards to transcripts/diplomas, many would choose an alternate form of improving their life and financial future.
A token in a slot machine would probably work just as well.
I do wonder how high the Canadian Bankruptcy percentages will be after this year though. Should be interesting.
So does a bankruptcy give you a criminal record? and if it is a criminal offense pardons are going to be granted after 7 years? I think that is what i understand from this. Please tell me if i am correct because this will affect me directly since i am worried about my debt to OSAP right now because i have just graduated from college but i want to go to university to do more schooling so i can get a better job but i’m still worried that even when i graduate and get a good job it might take me a long time to pay back my loan because it is going to be at least 40 thousand once i graduate! HELP!
JeeO: If you wish me to answer this question please post it on the “Ask a Trustee” forum so as many people can benefit from the information:
http://www.bankruptcycanada.com/blog/ask-a-trustee/
I have been out of school for 5 years now. I am 24. When I was 17 I had my first son and decided to show him you could do anything even when life is hard. I lived on my own, went to school got my GED then was approached by the counsellor about a new computer course being offered that started 4 days after I got my diploma. He talked me into it as well as OSAP. I never finished the course after the second semester finding out my son had Autism. I applied for IR and later found out when I was told I was accepted was actually declined and sent to collections. Then after being in a horrible accident that has left me with permant disabilities I applied for Permanant Disibility Benefits and was declined also.
I feel more horrible about my son who is now 8 not being able to have the life he deserves. I tried to show him how to get through hard times but this is a life lesson he shouldnt have to be exposed to.
Reading through all your letters takes such a load off now knowing I am not the only person going through this as it makes you feel like scum. I have had collection people tell me I am a bad mother among other things. I am wishing and holding some hope that I may be able to go now and clear myself to start anew.
Thank you all for sharing as you hold hope for others.
LeAnne M
Sunnshine__19@hotmail.com if anyone would like to connect or maybe share any ideas on what I could do?
Dear trustee, I am a Canadian resident and because of living here I have lost my license to practice my profession in the US. So, I am thinking of stopping to pay my student loans. What can the US creditors do to me here in Canada? How can I protect myself? I am married to a Canadian and all our assets are shared. Can they do anything with shared assets. We live in Quebec.
I was hounded out of the country because of my student loan.
I am a former crack addict and part od what helped me beat the rock was returning to university to finish my degree and get a teaching certificate. Coming out of uni the only job I could find was at a Second Cup ($8.00 per hour).
My wages could not supply me with a life AND pay my student loan, I also suffering from diagnosed chronic clinical depression. The depression left me barely able to cope with life let alove financial matters. Without being aware of it, I defaulted on my loan and was subsequently plagued with VERY abusive telephone calls from coolection agencies my government had employed to harrass me. By this time I was working as a teacher and considering crack again to escape.
Instead, to escape I got for jobs overseas. I now consider myself a non-resident of Canada. and I have no desire to return to a country that treated me in such a way.
Will declare bankruptcy next year – by then it will be 7 years.
You better google the term csl and bankruptcy and find out that you have to wait ten years I think, be carefull Brian Mullroney made some drastic changes on his last day in office as Prime Minister.Also under the law if at any time you made a statement to a bank or collection agency that as soon as you could you would repay the amount than the clock is reset and the time period to wait for bankruptcy is extended or rather begins again. It is crippling for many students when the supposed job rate is at a thirty year low to find out that graduates can only get in many cases menial work and lucky to get that. The reason being that many employers feel that you are over educated for the job. This happened to me .I actually applied for a job pumping gas couldn’t get it because the owner said I had no experience at which point I told him of my true educational background.The largest group of unemployed graduates has always been those with PHD’S. Good luck with the challenges of an imperfect world.
Ok… I am having a bit of trouble understanding this. Am I to understand that when the student bankruptcy laws change they will back date it to 2005? Everyone keeps mentioning that date and I dont know exactly what it means. If someone could clarify that would be great. I owe 50,000 in student loans and am eager to be able to move on eith my life too.
Erin: If you wish me to answer this question please post it on the “Ask a Trustee” forum so as many people as possible can benefit from the information:
http://www.bankruptcycanada.com/blog/ask-a-trustee-2/
I have been out of school for 9 years now and I have since aquired other debt due to a hardship and had to file bamkrupsy in 2006. I am still unable to pay my student loans off since I have been discharged from my bankrupsy that didn’t include my student loans, Do I now have to file bankrupsy in 2009 or will this be included in my last student loan.
I am currently trying to go back to school, so I can get a better job with some oppurtunities. Minimum wage cant pay alot when you have 2 people with health problems in the household. I am being told that since my bankruptsy listed my loan but did not release me from my obligation that I should not have gotten a student loan last semester 2008-2009.. I owe less then 600 on my loan from 1999 as I have had to pay it for almost 10 years even through bankruptsy. I filed bankruptsy in june 2005, 1 year before I would have been able to write it off according the the information above.. Because of all this, it would seem I am never going to get another loan or I am going to have to fight to get it.. I have told the OSAP office I will pay the money for the old loan. I am hoping that maybe something will happen and I will be approved somehow. It shoudl not be held against me that I was a stupid teen when I went to college the first time. I made a big mistake by getting married and moving away before my studies ended. I claimed bankruptsy cause that marriage did not work.
The seven year student loan bankruptcy law should be maximum two years from the date of completion. Here is my story:- I brought excellent educational background from back home and emigrated as Mechanical Engineering Technologist in 96 on point system but was ussuccessful to get a job. So had to go back to school at the age of 29 where I was asked to redo the education. Here is the math of that: spent 3 years in College Technology Diploma+1 year in job search=> Unseccessful. Then spent another 2 years in University for Bachelor’s Degree in Engineering Tech + 1 years in job search result=> Unsuccessful. Then again spent 2 years in Master’s Degree of Engineering +2 years in job search result=>still unemployed with a student loan of 73K and looking for a minimum wage job at 41 years of age and deprived of having my family. I feel so stupid, robbed and used by the universities, federal/provincial governments and banks. When the government ask for the money spent on education given back it does not include:
o The age factor of the person who went to university and how much time he/she have remaining to earn until retirement.
o The medical/health condition of the person e.g. my back has given up on me and left leg is full of hardware (resulted in arthritis) from surgeries from an traumatic accident while going for a job interview.
o The racism and discrimination that person may have faced while looking for a job or even doing/losing a job especially when he/she is a visible minority which most of the educated people are who come from other countries.
o That it is the responsibility of the government to create enough job opportunities for the educated people.
o The non-Canadian family of that Canadian person living back home as his family when he is obligated to support them. I mean he can not include them for interest relief application or tax purposes while actually they need to be supported.
Ø There is no control over the universities. Then are charging the fees they want. It is the student who puts 5-7 best years of his/her youth (especially at the age of 29) going to the university but the employers do not give a damn about the piece of paper neither do the universities after the got their money. If the students gets the job he/she does not work for himself he works for the governments/banks to pay student loans/interests etc. I know the amount of loan I have an the situation I am in, I will never be able to repay all the loan even if I pay until retirement. So, the students should not be punished for going to university by ruining their credit and concequently their family life.
Ø Should give ‘equal status’ to non-Canadian parents, brothers, sisters of Canadian people living back home so that we can include them in our tax returns while we support them when working. This is because I/we owe them for the support they lent us in my/our early age (when I was not a Canadian). Now, when they are old and they need me to support them, I should not be owned by the government as a cash cow. The tax, student loan laws need to be more ‘family oriented’ than ‘government oriented’.
I would like to say that something should be done for the poor people like me so that they can live their lives normally as you get life only once not twice. One should be able to live it peacefully and close to his/her family. Thanks !
Hi,
I was just wondering if anyone out there has actually been discharged of their students loans after 5 years of completing school under undue hardship.
hello,
i have a $50000 pound student loan. I finished university in 2002. I received interest relief for 5 years. I am currently living abroad, i have worked off and on but currently have no job and no savings.
I would like to return to canada but would like to claim bankruptcy. What information would i need to provide (and how far back) to claim bankruptcy since i haven’t been living in canada? Can i claim from abroad or do i need to be in canada?
thanks so much for your help
lola
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