Court of Appeal to consider release of student loans on discharge from bankruptcy

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Section 178(1)(g) of the Bankruptcy and Insolvency Act, RSC 1985, c B-3 provides that debts or obligations related to federal or provincial student loans are not released on discharge from bankruptcy when the date of bankruptcy occurred within seven years after the date on which the bankrupt ceased to be a full or part time student.

Accordingly, the date on which a bankrupt with student loan debts is considered to have ceased to be a student determines whether the student loan debts are released on a discharge from bankruptcy.

Courts in Canadian provinces have interpreted this provision of the BIA in two different ways. In some provinces, courts have adopted a “multiple date” approach, in which there can be different dates on which a bankrupt ceased to be a student that apply to different loans. In this approach, a bankrupt will only remain responsible for student loans received for studies within the seven-year period before bankruptcy.

In other provinces, including British Columbia, courts have adopted a “single date” approach, in which a bankrupt will remain responsible for all student loans, whenever advanced, if the bankrupt was a student within the seven-year period before bankruptcy.

The Court of Appeal will now consider the proper interpretation of the provision in British Columbia. In Piekut v. Canada (Minister of National Revenue), 2022 BCCA 50, the bankrupt, Ms. Piekut, sought leave to appeal a decision in which a judge of the Supreme Court held the “single date” approach applied. Ms. Piekut had received student loans between 1987 and 1994, and further loans when she returned to studies in 2002 to 2003. Ms. Piekut then returned to university from 2007 to 2009, but self-financed those studies. The single date approach would mean that Ms. Piekut would remain responsible for the repayment of student loans advanced more than seven years before her 2013 consumer proposal, on the basis that she had returned to studies from 2007 to 2009, four years before the consumer proposal.

The Court of Appeal held that it is in the interests of justice to grant Ms. Piekut leave to appeal. The Court noted that the interpretation of section 178(1)(g) is of significance to bankruptcy and insolvency matters and the practice, and that there is merit to the “multiple date” approach taken in other provinces. Now that leave has been granted, the Court will determine whether the “single date” approach or the “multiple date” approach applies in British Columbia, which could significantly change the effect of a bankruptcy for individuals with student loan debts.

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