Goulding (Re), 2020 NSSC 22

Will the court use the “single date” or “multiple date” method to determine whether a student loan is discharged?

If a student loan is more than seven years old at the date of a bankrupt’s filing, it is dischargeable as a s. 178(2) Bankruptcy and Insolvency Act (“BIA“) debt. If it is less than seven years old, it may still be discharged pursuant to a s. 178(1.1) “hardship” application once it has been more than five years post-study.

This case raises the issue of whether the Court should use the “single date” or “multiple date” method of determining whether a student loan is discharged under s. 178(2) of the BIA. 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, or does the clock stop each time they cease study?

The Debtor was a student from 1995 to 1999 (for which he received student loans), and again from 2003 to 2005 (for which he did not).  He declared bankruptcy in 2011. If one uses a “single date” method, the student loans are not discharged. If one uses a “multiple date” method, the loans applicable to 1995-9 would be included in the general s. 178(2) discharge provision.

Different jurisdictions have taken different approaches to this issue. Nova Scotia, Saskatchewan, Ontario and Newfoundland and Labrador have taken a “multiple date” approach. Given the objective of the student loan regime (that is, to facilitate education with a long-term view to a more productive economic whole), it logically follows that a return to study should not be penalized by “re-setting the clock” on student loans past.

If a person is a student in 2010-11 and again in 2015-6, the seven year period for any loan advanced for the 2010-11 period begins to run from the end of study date in 2011 (thus subject to discharge for bankruptcy filings in and after the anniversary date in 2018), not 2016. If you asked them in 2012, “are you a student,” the answer would be ‘no.’  Ask again in 2015 and the answer is “yes.”  Ask, “how many times were you a student,” and the answer would be “twice.”

Resetting the clock each time would frustrate one of the very themes of the BIA—debtor rehabilitation. Improving, refreshing, or perhaps even reinventing one’s skills and knowledge is an underpinning to financial success, independence, and societal productivity. It is perverse to think that Parliament either intended or enacted a structure that someone who ended studies in 2011 and went back to school for a semester in 2016 (with or without loan assistance) is “stuck” with the balance of his or her 2011 loan when they file for bankruptcy in 2019. Indeed, using the “single date” rule, they would not even be able to apply under 178(1.1) until 2021. It would be the ultimate embodiment of “a little learning is a dangerous thing.”

The Debtor’s first period of study was funded by student loans, and would have been “over seven years” but for the second period of study—in a different program, not funded by student loans. Imposing the “single date” rule would penalize the bankrupt for embarking on betterment that had exactly zero cost to the student loan program.

The Court ordered that the Debtor’s student loans were discharged under s. 178(2) as of the time of the Debtor’s general discharge.

AppearancesJustin Sterling Goulding, for himself, personally

 

 

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