Can student loan debt be discharged in bankruptcy?
The Debtor successfully completed a consumer proposal under the Bankruptcy and Insolvency Act, and brought an application respecting the discharge of her outstanding student loan debt. Pursuant to s. 178(1)(g)(ii) of the BIA, such a debt is not released where the proposal was filed “within seven years after the date on which [the debtor] ceased to be a full- or part-time student.” Accordingly, the Debtor sought a declaration that she ceased to be a full-time or a part‑time student in 2003 or at least prior to seven years before she filed the proposal and therefore that her student loan debt is deemed to have been released.
The Debtor argued that, while she did go back to school in the seven years preceding the filing of the proposal, that latest stint of schooling ought not to count for this purpose. She cited a line of authority from other provinces adopting the so-called “multiple date” approach, whereby the seven‑year period is seen to run only from the conclusion of the original period of studies associated with the loan in issue. This line of authority conflicts with the law in British Columbia and Québec, where student loan debt is not released under that provision if the Debtor became a student again at any time in the seven-year period prior to filing her proposal (Mallory).
The application turned on whether the Court should follow its earlier decision in Mallory. It was generally open to the Court not to follow Mallory in any of the following situations:
- subsequent decisions have affected the validity of the impugned judgment;
- it is demonstrated that some binding authority or relevant statute was not considered in the impugned judgment; or
- the impugned judgment was inadequately considered in the sense of being an immediate decision given without opportunity to fully consult authority.
The Debtor relied primarily on the first ground. She referred the Court to two subsequent decisions, one in Ontario (St. Dennis (Re)) and one in Nova Scotia (Goulding (Re)), in which the decision-makers expressly refused to follow Mallory and opted instead to adopt the multiple‑date approach that is espoused in the contrary line of authority. Those authorities questioned whether the court in Mallory duly considered the “fresh start” principle, according to which the BIA is seen to serve an objective of policy favouring the rehabilitation of those who invoke its protections.
The Court held that the “fresh start” principle must be viewed in its proper context, which is moulded by the statutory limitations to which it is expressly made subject in the BIA itself. It is not an absolute principle and must be balanced against the competing considerations set out in s. 178 of the BIA, which include the policy of discouraging so‑called opportunistic bankruptcies.
The Court saw no basis to revisit the decision in Mallory, finding that Mallory remains sound authority and that the Court should continue to follow it. The application was therefore dismissed.
Counsel: Cody G. Reedman and F. Ahmed of Reedman Law for the Debtor; Asaf Y. Mallek for Her Majesty the Queen in right of Canada; Fernando de Lima and Shannon Davis for the Intervenor, Her Majesty the Queen in right of British Columbia
Judge: Justice Milman