When you go back to school, does your government student loan debt come with you? According to the Supreme Court of Canada's recent decision in Piekut v Canada (National Revenue), 2025 SCC 13 ("Piekut"), the answer is a firm "yes."
The Court's decision clarifies how section 178(1)(g) of the Bankruptcy and Insolvency Act, RSC 1985, c B-3 (the "BIA") operates. That section says that borrowers who declare bankruptcy (or file a consumer proposal) are not released from their government student loan debts if their bankruptcy occurs within seven years after they ceased to be a student.
The decision resolves a long-standing split among Canadian courts, and may have far-reaching consequences for students facing higher tuitions, less employment prospects and, in many cases, greater financial risk. Let's explore the Court's decision.
The Background
Generally, when people are discharged from bankruptcy'or make a consumer proposal that is accepted by creditors'they are released from their unsecured debts.
There are exceptions.
Section 178 of the BIA states that a bankrupt will not be released from certain defined categories of debts that society deems to be particularly important to preserve even upon being discharged from bankruptcy, including alimony, judgments for fraud, and taxpayer-funded student loans.
That said, student loan debt can be discharged if enough time has passed. Specifically, if the bankruptcy (or consumer proposal) occurs more than seven years after the borrower ceased to be a student, the debt can be released. In cases of significant hardship, the waiting period can be shortened to five years.
But when, exactly, does that seven-year clock start ticking? And does it reset if borrowers go back to school later on...
