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CAUT Bulletin Archives

November 2003

Trial Date Set for Charter Challenge to Bankruptcy Law

The Canadian Federation of Students awaits its trial date with the Ontario Superior Court of Justice as a result of the federal government's decision to deny student loan borrowers the right to declare bankruptcy for a period of 10 years.

In 1997, under the auspices of Industry Canada, the federal government undertook a review of the Bankruptcy and Insolvency Act. During that review process, the government proposed that provincial and federal student loans be exempt from protection under the act for a period of two years. At the time, a series of hearings was held and a wide variety of organizations, including the Canadian Federation of Students, appeared before Industry Canada committees to argue against the proposed change. Despite these consultations, the act was amended to deny student loan borrowers the right to declare bankruptcy for a period of two years.

Less than 10 months later, the federal government amended the act again and extended the prohibition cap to 10 years. This change was buried in the legislation contained in the government's 1998 "education budget." No public hearings were held on the change and the federal government has never supplied any data justifying the change from two to 10 years. In addition, the change was buried in omnibus legislation and was never debated in the House of Commons.

In March 1999, the Canadian Federation of Students started legal proceedings to challenge the law under the Canadian Charter of Rights and Freedoms, claiming the Bankruptcy and Insolvency Act amendments are discriminatory and unconstitutional.

"The Charter challenge was brought as a result of the Canadian government's decision to deny student loan borrowers the right to avail themselves of the protection afforded by the bankruptcy law," said CFS national chairperson Ian Boyko. "Their right to protection has been taken away by the federal government and the courts now have the role of deciding whether their exclusion is fundamentally unfair under the Charter."

James Turk, executive director of CAUT, said the restriction is out of hand.

"It's outrageous that a gambler can declare bankruptcy for massive losses at the race track, but a former student cannot declare bankruptcy if overwhelmed by debt incurred to obtain an education," Turk said.

Pre-trial cross-examinations were completed last spring. A tentative trial date has been set for Nov. 19, 2003.