Bankruptcy: The Real 7-Year Rule
Canada's bankruptcy rules are so complicated that nearly everything you read about them is wrong.
Here's the most common error: "You can't declare bankruptcy on your student loans until they're 7 years old." You even read this on the websites of bankruptcy counsellors. Student loan rules are a mystery to many, many people.
Unless you took your student loans before the 1998 legislation that created a 10-year restriction against bankruptcy for student loans – now amended to a 7-year restriction, the issue isn't about how old your loans are. Maybe that would be too logical.
The issue is about when you last left school – even if you went back to school without a loan.
It may seem unreasonable if you're poor and trying to better yourself, but a common interpretation of Canadian bankruptcy law is that you can't include student loans in a bankruptcy until you've cut yourself off from education for seven consecutive years. (Or five years if you can prove ongoing economic hardship).
The message is – what? Stay away from night school?
Well, not necessarily. There is a growing body of judgements that takes a less strict interpretation of these rules, such as in Saskatchewan and Nova Scotia. But be warned: one credit post-secondary course could start your 7-year wait all over again.