Wiping Out Canada Student Loans in Bankruptcy: Good Faith = Success

3 Dec 2020 blogs
The question is often asked: “If I go bankrupt will my student loan(s) be discharged?” The answer to this is you will not know until your case is examined by a judge in a bankruptcy court on that day it is to be heard. Your bankruptcy trustee can tell you anything, but really – they don’t even know.

Another thing to consider is that a large number of people in the last several decades that have filed for bankruptcy in Canada wound up still owing and having to pay their student loans despite being told otherwise by their bankruptcy trustees. Why is that? There are a number of reasons but the most common are court-imposed conditions that must be met before consideration for an order for discharge. Or the (dreaded) motion to oppose a discharge of the student loan by the government by its appointed legal counsel, and the court being satisfied by these convincing defence lawyers thus denying you much deserved relief.

Sounds like a prison sentence doesn’t it? Well, figuratively it is since student loans are quite big and unless you can pay the interest you could be looking at a lifetime of captivity.

The one single piece of advice you should consider – do not go bankrupt unless you are “really” bankrupt and have a completely honest and workable strategy going forward. One that will work towards satisfying the court that you should not be forced into an exceedingly long period (even lifetime for some); of servitude to the very lucrative government cash cow, the Canada Student Loans Program.
Also, the cost may exceed value and that is just how it is with the “business of bankruptcy” unfortunately. It needs to sell it and ultimately move people through the bankruptcy production line in order for it (the bankruptcy business) to survive. Unfortunately, though lots of people end up bankrupt that really should not have gone this route without first making sure it is the RIGHT move on the financial chess board of life.
But – if you’ve already taken the bankruptcy path then it is important that you become familiar with your surroundings and options so you can prepare to deal with the aftermath if it is not a favorable one.
On the other hand, Bankruptcy is necessary for certain people and businesses who have no other reasonable way to service debt and financial responsibilities. These are in effect – bankrupt. The mechanisms for grading the level of good faith and behaviour of the bankrupt by the court is easier to satisfy in such cases because of the severity of financial crisis and, that by entering Bankruptcy proceedings it has been done so in good faith. So, the protection Bankruptcy offers this smaller percentage of people and businesses is a blessing to say the least.

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