Supreme Court of Canada clarifies treatment of student loan debt under bankruptcy law

The Supreme Court of Canada is pictured in Ottawa on Friday, March 3, 2023. THE CANADIAN PRESS/Sean Kilpatrick

The Supreme Court of Canada says a person must wait seven years after completely finishing their post-secondary studies before they can be released from student loan debt under the federal bankruptcy law.

The top court’s decision came Thursday in the case of Izabela Piekut, who received government student loans in the course of three university programs from 1987 to 2003.

Piekut later returned to school and earned a master’s degree in 2009 without the help of additional student loans.

In 2013, she made a consumer proposal under the Bankruptcy and Insolvency Act, an alternative to bankruptcy that allows for payment of a portion of the money owed, or payment over an extended period.

Under the bankruptcy law, a person may be released from their student loan debt seven years after they cease to be a full- or part-time student.

In 2019, Piekut argued that she was no longer a student for the purposes of the law as of 2003, when she completed her last period of study funded by a government student loan.

A British Columbia judge rejected her argument. That ruling was affirmed by the B.C. Court of Appeal. Piekut then took her case to the Supreme Court.

In its decision, the top court noted the issue has divided courts across Canada.

Courts in British Columbia and Quebec said that there can be only one date on which a person ceases to be a student -- their final day of enrolment.

However, judges in Newfoundland and Labrador and Ontario, and registrars for bankruptcy in Nova Scotia, Saskatchewan and New Brunswick, said that there can be several such dates, corresponding to when various programs of study ended.

Justice Mahmud Jamal, writing on behalf of the Supreme Court majority, said the single-date approach is the correct interpretation.

The legislative history and parliamentary debates surrounding the law show that it pursues several mutually supportive purposes or policy goals, Jamal said.

They include reducing government losses from student loan defaults in bankruptcy, ensuring the sustainability of government student loan programs for future generations of students, and giving borrowers a reasonable opportunity over a continuous period of time to capitalize on all of their education to repay their publicly funded student loans, “thus deterring opportunistic bankruptcies.”

Jamal ruled the single-date approach promotes these purposes better than the multiple-date approach.

This report by The Canadian Press was first published April 17, 2025.

Jim Bronskill, The Canadian Press