On February 6, 2008, Douglas Hoyes and Ted Michalos (that’s me in the picture) traveled to Ottawa in order to provide testimony to the Senate Standing Committee on Banking, Trade and Commerce regarding bankruptcy reform. I was the only Guelph personal bankruptcy trustee that has appeared as a witness before the Committee.
Last fall, the Parliament of Canada quickly passed new bankruptcy legislation with the promise that the new law would receive a detailed “second look†in the Senate. With the threat of another election, the Senate decided to pass the law quickly and it has been proclaimed, but not brought into force. Regardless, the Senate decided to conduct hearings regarding the changes with an eye towards the next round of bankruptcy reform. It was with this in mind that Doug and I traveled to Ottawa.
Anyone living in Ontario may recall that February 6 we got hit by a blizzard – all flights were cancelled and Doug and I drove to Ottawa in order to give our testimony. Not much fun, but this legislation is important enough to warrant the extra effort.
Our oral testimony focused on two things – student loans and bankruptcy in Canada and the Canada Revenue Agency.
The new law reduces the exclusion period for student loans from 10 years to 7 (5 on application to the Court). We argued that the period should be further reduced to 2 years.
For those of you unfamiliar with student loans, the current law requires a person to be “out of school for a minimum of 10 years before their student debt may be discharged (eliminated) by bankruptcy or a proposal. The new law reduces that period to 7 years and allows individuals to apply to the Court after 5 years for special consideration.
Student loans are the only type of debt to have such a time-delayed feature and we argued that is was fundamentally unfair. We selected a 2 year period as that is the period of time that the student loan person will allow a person to defer interest and payments when they finish their studies. If a person hasn’t found gainful employment that will allow for the repayment of their student loans by that time then we suggest they may never be able to properly service the debt.
We provided an analysis of our existing clients for the last 18 months (some 3,000 individuals and families). We determined that those with student debt are likely female with a single dependent and earning 50% less than the average Canadian.
We further argued that the problem wasn’t one the Bankruptcy and Insolvency Act should be trying to solve. The government needs to determine how education will be financed and adjust the system of lending so that people don’t have to rely on the Bankruptcy and Insolvency Act to deal with their student loans.
Next week I’ll post my comments on how bankruptcy law deals with Revenue Canada and tax debts.
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