A Question Regarding Student Loans

2008-02-27

Currently, if you ended your studies less than 10 years before you start a bankruptcy, the bankruptcy will not release you from your obligation to repay the student loans. Once 10 years has passed, if you are still unable to repay the student loans, you can apply to court and request that the court extinguish the student loans. You will have to show the court that it is necessary and appropriate for them to grant your request. The proposed changes are as follows:The waiting period for release of the debt by a bankruptcy will be reduced from 10 years to seven. So, if you ended your studies more than seven years before the start of a bankruptcy, the bankruptcy will release you from the student loan debt. It is expected that this change will apply to individuals who go into bankruptcy after the date the change comes into force AND to undischarged bankrupts (individuals who started their bankruptcy before the change, but who have not yet received their discharge).The waiting period for applying to court will be reduced from 10 to five years, and will be available to anyone who uses the bankruptcy process either before or after the change comes into force. These changes are part of a large number of changes being made to the legislation. The effective date of the changes is not yet known, but many sources believe that it will be in late 2008. There have been suggestions that some of the changes may be put into force earlier, but nothing has been announced as yet.