BC Court of Appeal confirms single date approach to discharging Student Loans through a consumer proposal or bankruptcy.
A recent decision by the BC Court of Appeal confirmed that BC will continue to follow the single date approach when considering whether or not a Student Loan is dischargeable through either a consumer proposal or a bankruptcy.
In the recent decision of Re: Piekut (2023 BCCA 181) the Court declined to change the single date approach to a multiple date approach when considering if Student Loans are discharged in either a consumer proposal or bankruptcy and continued to follow the current jurisprudence that was established in 2015 in the BC Decision of Re: Mallory (2015 BCSC 5).
Currently, the Bankruptcy and Insolvency Act (“BIA”) legislation provides that if a bankrupt ceases to be a student within seven years of the filing of a bankruptcy, the debt will not be discharged at the end of the bankruptcy. This section also applies to individuals who have filed proposals.
If it has been greater than seven years from the date of a bankruptcy or a proposal, then the debt would be dischargeable.
We understand that Student Loans Regulations considers the End of Study date to be when an individual ceased or ceases to be a student. This date doesn’t mean the last day you attended school. It is the date that the government considers to be the last date of the program you were last enrolled in. It also includes both full-time and part-time attendance.
A student loan may be discharged if the student makes a “hardship” application to have the student loan discharged in a bankruptcy or proposal. The criteria is that more than five years has elapsed post-study but less than seven years has elapsed from the filing of the bankruptcy or proposal (more on that later in a subsequent paper).
The debtor in this case raised the issue of whether the BC should continue to use a “single date” approach as decided in Mallory or a “multiple date” approach when determining whether a student loan is discharged under s. 178(2) of the BIA which has been adopted in other jurisdictions.
The Court of Appeal rejected the multiple date method of determining when an individual ceased to be a student and confirmed that Mallory was of sound reasoning. It also stated that decisions in other jurisdictions decided subsequent to Mallory that adopted the multiple date method didn’t identify any error in the Mallory analysis and did not find them persuasive despite having a different outcome. It stated that decisions in other jurisdictions did not adequately consider the structure and the language of S178(1)(g) nor the differences between the English and French versions of the BIA.
So the question is, “Does a student who is in-and-out of school, with or without student loans for each (or any) session, reset the clock each time they enroll in subsequent studies”.
For example, if you file a bankruptcy or proposal and have student loans that are more than seven years old, but in the meantime, have gone back to school and self-funded those studies, within seven years of the insolvency filing, when have you ceased to be a student. Is it from the time you ceased to be a student on the first loan, or when you went back to school on the self-funded studies.
In BC the Court of Appeal confirmed that indeed the clock does reset as decided in Mallory and confirmed in Piekut. The end result is that the student loan survived the proposal and was not discharged under the BIA.
There has been no word on whether leave to the Supreme Court of Canada will be sought.
If you have Student Loan debt that is unmanageable, contact us today. We offer a free no-obligation consultation where we will look at all your debts with you and help you decide if a bankruptcy or consumer proposal makes sense to deal with your student debt.
A virtual meeting is available via Zoom or Microsoft Teams. Or we can chat on the phone or by email. If you would like an in-person consultation, we can arrange that as well. We have offices in Vancouver and Surrey.
Call us. It’s not too late!