Giera Student Loan Bankruptcy Case

2008 CarswellOnt 6879

Giera, Re

In the Matter of the Bankruptcy of (Editor's Note: First names were omitted by request but this document is public) Giera Of the City of Toronto, in the Province of Ontario
Ontario Superior Court of Justice

Dep. Reg. J.E. Mills

Judgment: November 18, 2008
Docket: Estate No. 31-1014619

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Counsel: J. Adiken for Trustee, MSI Spergel Inc.
D. Nakelsky for Attorney General of Canada
W. Giera for himself

Subject: Insolvency

Bankruptcy and insolvency --- Discharge of bankrupt — Conditional discharge — Student loans.

Cases considered by Dep. Reg. J.E. Mills:
Kelly, Re (2000), 2000 CarswellOnt 4170, 20 C.B.R. (4th) 251 (Ont. Bktcy.) — referred to

Statutes considered:

Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3
s. 178(1)(g)(ii) — referred to

Dep. Reg. J.E. Mills:

1 This is a second bankruptcy event for the Bankrupt, the first being in 1999. At the time, the Bankrupt had completed school and had incurred consumer debts in excess of $50,000. This bankruptcy has been filed solely to expunge the student loans that were not discharged with the prior bankruptcy as more than ten years have passed since the Bankrupt was a full-time student (as per s.178(1)(g)(ii) of the Bankruptcy and Insolvency Act). The only proven claims are in respect of her student loans and they amount to $21,003.93. The loans were obtained for two college programmes, one in dental assistant training and the other for a dental technology programme. Both programmes were completed. Upon graduation, the Bankrupt obtained employment in an orthodontic office, building orthodontic appliances. During this time, the Bankrupt developed a severe allergic skin reaction to the materials used such that she required medical treatment. Once she ceased this employment, her skin problems disappeared. The Bankrupt concluded that she was allergic to the products used in the dental/orthodontic appliances.

2 Shortly after the completion of her schooling, the Bankrupt did apply to defer payment on the student loans but she has made a number of payments to a collection agency over the last several years. It would appear that the monies paid were being collected on behalf of the Ministry of Finance for the Ontario Student Loan portion of her debt as counsel for the Attorney General advises there has not been a single payment against the Canada Student Loans. The Ministry of Finance did not file a proof of claim although the Statement of Affairs lists the debt at $18,000.

3 The Bankrupt now works as a receptionist in a dental office. She does not perform any of the skills for which she received training at either of her college programmes. The Bankrupt's Affidavit of Income and Expense indicates that she currently has a monthly surplus of $375, after having taken into account a clothing allowance that the Bankrupt advised was an unusual expenditure for this one month. The Bankrupt's evidence was that she does not live an extravagant lifestyle, she has not travelled, she has no savings nor has she been able to put away any money for her retirement in the future. She is a forty-one year old single woman and currently has no debts other than the student loans in question. She appears to have been financially rehabilitated with respect to consumer debts from her prior bankruptcy filing. The Bankrupt stated that she had fully intended to pay back the money when she received the loans. Unfortunately, she has not been able to do so to date and would like to make a fresh start after ten years of receiving calls and notices from collection agencies regarding these debts.

4 Counsel for the Attorney General relies on Kelly, Re, [2000] O.J. No. 4373(Ont. Bktcy.) for the Court's assessment of whether the student acted in “good faith” respecting the student loan liabilities. In this regard, the Court is to examine whether the money was used for the purpose loaned and if the education was completed, whether the Bankrupt is deriving economic benefit from the education, whether there were any reasonable efforts to repay the loans and whether there was any effort by the Bankrupt to take advantage of interest relief or remission options offered by the lenders. In this case, the Bankrupt did in fact use the money for her education and she did complete the courses taken. She is currently employed in a dental office, although not utilizing any of the skills for which she received training. In this regard, it may be said that the Bankrupt is "under employed" for her qualifications. It would appear however, from the Bankrupt's testimony, she has medical issues which impede her from working as a dental technician. With respect to reasonable efforts exerted to repay the loan, the Bankrupt falls somewhat short. Clearly, she has satisfied this component of the test with respect to the Ontario Student Loans but not so for the Canada Student Loans. The Bankrupt testified she did not appreciate that she was only making payments against her Ontario debts. She simply made payments to a collection agency to be applied against her student loans. This is a credible explanation and therefore, I find that the Bankrupt had no intention to specifically ignore or avoid repayment of her Canada Student Loans.

5 Discharge of student loan debt is also dependent upon the Bankrupt establishing that she has and will continue to experience financial difficulty to such an extent, she will be unable to pay the student loans. The Bankrupt lives modestly and within her financial means. She was honest and forthright in her evidence. I accept that she has struggled to live within her budget and she is to be commended for not turning to consumer credit to make ends meet. Although her employment appears to be stable, the Bankrupt does not earn an income commensurate with her education and is not likely to do so in the foreseeable future.

6 The Bankrupt has provided a sworn Affidavit of Income and Expense which indicates a monthly surplus that would allow for some payment to her Estate on account of her student loans. There was no evidence led by the Attorney General as to the principal amount of the debt. In the circumstances and following other decisions of this Court, I am of the view that the Bankrupt should be required to pay the principal amount of the debt. Without specific evidence to this amount, I conclude that the principal amount is $8000. In closing submissions, Counsel for the Attorney General sought payment of $15,000 without providing any explanation as to how he had arrived at the amount. If I am wrong in my calculation of principal and the request of the Attorney General is in fact the outstanding principal, I find that a repayment of approximately 53% of the requested amount would be appropriate in these circumstances. In my view, based on her budget, the Bankrupt can afford to repay $8,000 of her student loans and this payment is a condition of her discharge from bankruptcy. As this is a second bankruptcy, the discharge will also be suspended for six months, concurrent to the condition.

7 Counsel for the Attorney General requested $500 in costs for the opposition. Costs are awarded in this amount and are to be paid out of the first proceeds of the Estate.