I do not know where to post the following. I will post it here for the benefit of all. A general note to everyone who has made an assignment into bankruptcy prior to the expiration of the limitation period set out in s, 178.1(g) of the Act. Prior to June 18, 1998, this period was 21 years. After that date up to July 7, 2008, the period was 10 years. After that date, the period was 7 years. If you went bankrupt or made a proposal prior to that limitation period, your student loans are not subject to discharge and the rights of the SL creditor are revived upon the discharge of the trustee.
The Act in s. 178 1,1 provides that (upon the eventual expiration of the appropriate limitation period) the discharged bankrupt or consumer debtor may make an application to the bankruptcy court for an order rendering s. 178 1(g) inoperative in their bankruptcy or proposal effectively and retroactively discharging the SL debt. In order to be granted this hardship relief, the SL debtor must establish that they have acted in good faith with respect to their liabilities under the loan AND that they are currently and will continue to experience financial hardship with respect to their liabilities under the student loans. The burden to prove these circumstances rests with the debtor.
The study end date for the purposes of determining whether a student has ceased to be a full or part time student has been determined by case law. A post on this blog earlier asked if going back to school with fees paid by the student themselves, a government program (EI, grant, etc.) and employer etc. restarts or continues the end of study date. Returning to school without the use of government student loans DOES NOT restart or extend the limitation period after which hardship relief can be applied for.
The appropriate method of determining financial hardship is to do a Directive 11R surplus income calculation based on the Superintendent's Standards. This is the calculation done by the trustee to determine what you would pay to your bankrupt estate should you go bankrupt again. Good faith is determined by finding out if you used the loans for their intended purpose, attended school / graduated, received an economic benefit from the education, made efforts to repay the loans and applied for interest relief / loan forgiveness if and when necessary.
This application can be made at any time after the debtor's discharge and the expiration of the limitation period. The cost of the application is $10.00 for an summary administration bankruptcy or consumer proposal and $50.00 for an Ordinary Administration. The debtor can represent themselves as long as they follow the court procedures in their jurisdiction.
If you are still insolvent arising from student loans in your first bankruptcy or consumer proposal, you do not need to go bankrupt again or make a second proposal to deal with these loans. Make your hardship application. You have a lot to gain and little to lose.
Example: "A" ceased to be a full or part time student in May 2001. "A" made payments on his student loans and obtained interest relief from time to time. "A" went bankrupt in 2004 and was discharged in 2005. "A" went to university taking computer science. "A" could never find work in that field of study. However, he eventually found employment making widgets at slightly more than minimum wage. He was married with 2 kids. Unable to deal with the student loans after interest relief expired and having accumulated substantial other debt, he went bankrupt. At the date of bankruptcy, he had ceased to be a full or part time student for a period of ten years. His student loans were not subject to discharge and the student loan creditors rights were revived upon the discharge of the trustee. "A" returned to school in 2007 under an EI program to upgrade his skills. He would be eligible to seek hardship relief or have a student loan discharged in a subsequent bankruptcy in May 2011. His returning to school paid by EI did not change his study end date with respect to the government student loans.
Amendments to the BIA in July 2008 reduced the waiting period for hardship relief to 5 years from 10. It also reduced from 10 to 7 years the limitation period to have a student loan subject to discharge. Under these changes, "A" would be eligible to make his hardship application at any time after his discharge and five years from May 2001 meaning any time after the amendments of July 2008. Most discharged bankrupts who were waiting for the end of the 10 year limitation period are now eligible to make a hardship application. Debtors should strongly consider this option rather than a second bankruptcy or proposal. The hardship application is not a second discharge. There is not a discharge for student loans and one for everything else. The hardship application if successful renders the previously undischarged student loans retroactively subject to the earlier discharge.
There is all kinds of case law on this subject on the internet. In many cases, the student loan creditor consents to the requested relief or does not oppose it. I have been involved in many of these applications with a great deal of success.
Bankruptcy and Hardship Process
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