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The dog ate my student loan payment form

If you're staggering under student debt, bankruptcy might not be the best way out

According to a recent article in the The Toronto Star, the federal government’s Bankruptcy and Insolvency act makes it pretty difficult to dodge student loans through bankruptcy.

If you really want to declare bankruptcy, business writer James Daw says you’d better have a good excuse for not paying, “even after the five to seven years… that the legislation allows for such debts to be wiped clear.” Students must allow show that they tried in “good faith” to repay the loans and are now absolutely unable to pay.

After one 29-year-old medical student suffered a traumatic brain injury while cycling in Vietnam after graduation, she still owed Royal Bank $134,000, which was partially to cover her student loans. She was granted a discharge of those debts, and is now living on social assistance.

But, according to The Star, not everyone who asks for bankruptcy will qualify.

One Mississauga woman raised a 16-year-old son on her own until he decided to move in with his father. Although she currently makes about $53,000 a year, she declared bankruptcy in 2000 when she owed student loans totalling $21,000.

According to the bankruptcy registar, the woman made a few questionable decisions, which included selling her 12-year-old car and leasing a new Volkswagen to commute from Mississauga to her downtown Toronto job and to visit her son in Ottawa. She also provided her son with a cellphone.

Most Canadians would find it troubling that she wanted to be free of loans for the education that helped her find her job and qualify for a public sector pension, said the registrar. “There is no good reason why repayment of the loans for those studies ought not be made, over a lengthy period of time, perhaps even… her working life.”

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