When can government-issued student loan debts be released under the Bankruptcy and Insolvency Act?

Case Brief on Piekut v. Canada (Minister of National Revenue), 2025 SCC 13

Facts:

The appellant went to college and university over several years, getting federal student loans between 1987 and 1994, and again from 2002 to 2003. She later consolidated those loans between 2006 and 2009. When she filed a consumer proposal under the Bankruptcy and Insolvency Act (BIA) in 2013, she still owed $26,658 in federal loans and $2,101 in Alberta student loans. Her assets totaled $280,529, while her debts added up to $356,155. She finished the consumer proposal in 2017 and received a certificate of full performance.

What is the Seven-Year Rule Under the BIA?

The BIA is meant to help people get a fresh financial start while also making sure their assets are fairly shared among creditors.

Section 178 of the BIA outlines certain types of debts that are not discharged in a bankruptcy. These include alimony, judgments for fraud and taxpayer-funded student loans. But not without exception.

Section 178(1)(g) of the BIA says student loans can’t be wiped out in bankruptcy if it happens within seven years of when someone is no longer a full- or part-time student. There’s an exception after five years under section 178(1.1), but only if the person has acted in good faith and is still struggling financially.

The Decision:

In 2019, the appellant went to court asking for a ruling that she stopped being a student in 2003, which would mean her student loans could be discharged under the seven-year rule. If not, she wanted relief based on financial hardship. She argued for what she called a “multiple-date” approach, saying each stretch of education should be looked at separately to ascertain when she officially stopped being a student. She said her last time getting government-funded education was in 2003, even though she was in school until 2009.

Both the B.C. Supreme Court and the Court of Appeal rejected her argument. They went with a “single-date” approach, which means they looked only at the most recent time she stopped being a student, regardless of when she took out the loans. The courts said the law focuses on when someone stopped being a student—not how or when the loans were used.

The Supreme Court of Canada agreed. The majority said the wording, context, and purpose of the law all supported the single-date rule. It helps prevent people from declaring bankruptcy right after finishing school and gives the government a fair chance to collect on student loans. Since the appellant last attended school in 2009, her loans wouldn’t be dischargeable until 2016.

In the end, the Supreme Court dismissed the appeal, affirming the single-date rule, which reflects the correct interpretation of s. 178(1)(g)(ii), for student loan discharge under the BIA.

Takeaway:

Although this decision limits dischargeable debts in bankruptcy, it provides the much-needed clarification on how section 178(1)(g) of the BIA applies, confirming that the single-date approach determines when student loans can be discharged in bankruptcy.

As Justice Jamal stated:

“this “single-date” approach promotes the statutory purposes of this provision: to reduce government losses on student loan defaults; to ensure the sustainability of student loan programs for future generations; and to ensure borrowers have a reasonable time after finishing their studies to capitalize on all their education to allow them to repay their student loans, thus deterring opportunistic bankruptcies.”

This decision maintains the importance of student access to financial aid and ensures government assistance programs remain sustainable.

Written by: Juliana Kotsopoulos