Senate suggests earlier bankruptcy, debt relief

Tuesday, April 7th, 2009

A bill currently being discussed by the Senate could ease the dread of bankruptcy for many students and alumni.

Student unions across Canada are rejoicing about Bill S-205, which proposes two main amendments to the Bankruptcy and Insolvency Act.

First, the bill suggests the seven-year waiting period for filing bankruptcy for student loan payments be reduced to two years after the end of post-secondary education.

The new legislation also recommends students with long-term financial difficulty be allowed to apply for a court order to relieve them of all or at least part of their student loans.

Senator Yoine Goldstein, who re-introduced the bill, thinks the current version of the BIA treats students unfairly, adding seven years is a long time to wait when you’re financially unstable.

“Post-secondary education is an investment,” Goldstein explained, “No different than an investment that an entrepreneur makes when he or she starts a business; if that business fails, he or she gets relief from that indebtedness.”

The bill is supported by several student unions including the Canadian Federation of Students, the Coalition for Student Loan Fairness, the Canadian Alliance of Student Associations, and Federation Étudiante Universitaire du Québec.

Zach Churchill, national director of CASA, agreed seven years is too long: “It’s an obscenely long amount of time " almost a decade.”

He attributed students’ inability to repay loans as part of a larger problem.

“It stems from a lack of federal leadership ... bright minds are being forced to choose between higher education and debt, or a sub-standard living.”

“Whether it’s seven or two years, there will still be people declaring bankruptcy as long as the system is overly inefficient,” Julien Benedict, founder of CSLF, agreed.

While Goldstein acknowledged the burden of tuition costs has increased dramatically, he pointed to post-secondary institutions as part of the solution, asking them to advise students on finances.

“There’s no other institution available to do it. Somebody has to teach it ... the average college student is not as financially literate as he or she should be,” Goldstein explained.

According to Benedict, a lot of students go bankrupt because they do not have the right information when it comes to dealing with loans.

“We think that more needs to be done so that borrowers know their rights and get help when they need it,” he said.

However, Churchill emphasized the lack of government funding as the bigger issue, although he agreed small steps like Bill S-205 are helpful as well.

“There’s a logic behind this bill and a lot of practicality,” Churchill added.

Benedict thought the bill was a step in the right direction and hoped for “new relationships between borrowers and the government that emphasize working together as opposed to an adversarial relationship.”

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