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Douglas Hoyes and I appeared on AM 640 Toronto Radio last Saturday to discuss filing bankruptcy in Toronto. |
During the hour long show I took a call from a lady who had filed and completed her bankruptcy quite a while ago, but her student loans were not included in her bankruptcy because they were less than 10 years old. Now, she wanted to know what her options were.
By way of background, the current laws are such that if you have a student loan and it has been less than 10 years since you have been out of school, the student loan cannot be included in your bankruptcy (or consumer proposal). The logic behind this government policy is that the “knowledge” you obtained while your were educated at the government’s expense will stay with you for a long time, so you are not relieved of this debt if you file for bankruptcy within 10 years of finishing school. This 10 year rule is slated to be reduced to 7 years, but this change may not come into play until the fall of 2008. (More information can be found on the Canada student loan bankruptcy web site).
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Benny Mendlowitz, Trustee |
So what can this person do with their student loans that they still cannot repay? Well, if the 10 years has now passed since they have been out of school, they can apply to the courts and ask that the student loans be discharged (released) even though they were not included in her original bankruptcy filing. She will have to prove to the courts that she is not benefiting from her education. |
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And if the courts refuse her? Well, she can go bankrupt a second time as 10 years have gone by. Not my preferred recommendation, but an option none the less.
If you have found yourself in a similar situation, call our Toronto bankruptcy team at 310-PLAN (310-7526, no area code required) or E-mail us to arrange a free initial consultation. We can help you work on a solution to your student loan dilemma.
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