Existing student loans in bankruptcy

How is student loan debt treated in bankruptcy? – Debts from student loans in bankruptcy are extinguished if your bankruptcy occurs more than seven years after you ceased to be a full or part-time student. (Note: In July 2008, the time period was reduced from ten years to the current seven years.)

However, if you file for bankruptcy prior to the end of the seven year period, you may still apply to the court and ask that the student loan debt be extinguished as long as:

  • It is at least five years since you ceased to be a full or part-time student;
  • You can show the court that you have made an honest effort to pay the student loan debt; and,
  • You are now financially incapable of paying off the student loan debt.

It is important to know that the court has recently ruled that the five or seven year time period following your ceasing student loan funded studies is restarted if you return to full or part-time studies. This is true even if those further studies are not funded by further student loans.

Future student loans

(Policies for the granting and administration of student loans in Canada are determined by those institutions and organizations granting the loans. As such, the policies are subject to change from time to time.)

Under current policies, if you have no student loan debt and you file for bankruptcy, this does not affect your ability to obtain a student loan in future.

However, if you have been previously relieved of your student loan debt by including your student loans in a bankruptcy, you will likely be restricted in your ability to obtain student loans in future.