Can a student loan be discharged in the current environment?
On March 27, 2020, the Court adjourned all scheduled applications for student loan discharges under section 178(1.1) of the Bankruptcy and Insolvency Act (the “BIA“), including this one. The Court currently operates under an “essential services” model, as a result of the Covid-19 pandemic. Only urgent or essential matters are presently being heard, as determined by the presiding jurist, and “urgent or essential” has a present narrow construction.
In the specific context of s. 178(1.1) student loan applications, the BIA requires that the applicant demonstrate, on a balance of probabilities, that s/he “has and will experience financial difficulty to such an extent that the bankrupt will be unable to pay the debt”.
Both the Canadian and Nova Scotia governments have announced an interest free six month moratorium on student loan payments. That is automatic and applies to all federal and Nova Scotia student loan debts. As the term “interest free moratorium” implies, the balance does not increase during that time, and the minimum payment is zero. Therefore, no student loan that falls under either moratorium, or both, can be said to be “urgent or essential” within the meaning of the current essential services delivery model.
As well, a minimum payment of zero, without interest, cannot presently meet the requirement of 178(1.1)(b) that the applicant “has and will continue to experience financial difficulty to such an extent that the bankrupt will be unable to pay the debt.” While an applicant might find herself facing other difficulties, such as credit constraints or angst as a result of the student debt load, that is not the test. The difficulty must apply to this loan, and it must be financial difficulty.
In addition, pursuant to s. 192(1) of the BIA, the Court has jurisdiction:
(k) to hear and determine any matter relating to practice and procedure in the courts;
(m) to perform all necessary administrative duties relating to the practice and procedure in the courts;
Section 192(1)(m) gives power to the registrar to perform all administrative duties. The organization and the day-to-day running of the court sitting in bankruptcy is vested in the registrar. With specific reference to student loans applications, the Court has adjourning jurisdiction.
In the current circumstances, refusal with leave to re-apply is not appropriate. The Court is not deciding any particular case on its “usual” merits. Instead, it is acting in reflection on the current moratoria and the current Court essential services delivery model. Section 178(1.1) student loan applications are accordingly adjourned without day. An applicant who has previously filed, who wishes to re-apply after the end of the moratorium applicable to him or her, and upon either resumption of usual Court activity or upon establishing that the matter comes within the ambit of the “urgent and essential” threshold, may do so, by re-filing and re-serving the appropriate documentation.
The Court adjourned the application without day.
Judge: Raffi A. Balmanoukian, Registrar