Debts that survive bankruptcy in Canada, and the student loan 7-year rule
Which debts a Canadian bankruptcy or consumer proposal does not release under BIA s. 178, how the student loan 7-year rule and 5-year hardship relief work, and secured debts.
A Canadian bankruptcy discharge releases most unsecured debts, but section 178(1) of the Bankruptcy and Insolvency Act lists debts that survive: court fines and restitution orders, child and spousal support, debts from fraud or false pretences, certain damages for intentional bodily harm or sexual assault, and government student loans if you file while still a student or within 7 years of ceasing to be a full- or part-time student. After 5 years you can apply to court for hardship relief for the student loan. The same categories generally survive a consumer proposal unless the creditor agrees otherwise. Secured debts, such as a mortgage or car loan, are not "released" in the practical sense either: the lender keeps its security.
Part of the consumer proposal vs bankruptcy overview. General information, not legal advice.
The s. 178(1) list in plain language
| Paragraph | Debt that survives | Notes |
|---|---|---|
| (a) | Fines, penalties, restitution orders and similar court orders for offences, and debts on bail or recognizances | Includes many provincial offence fines |
| (a.1) | Civil damages for intentionally inflicted bodily harm, sexual assault, or wrongful death resulting from them | |
| (b), (c) | Support: alimony and support or maintenance under a court order or agreement for a spouse, former spouse or child living apart | Arrears and ongoing support both survive |
| (d) | Debts from fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity | Quebec wording refers to trustees or administrators of others' property |
| (e) | Debts for property or services obtained by false pretences or fraudulent misrepresentation | Creditor usually needs to prove it |
| (f) | Undisclosed claims, if the creditor did not know of the bankruptcy | Disclose every creditor |
| (g) | Federal or provincial student loans within the 7-year window | See below |
| (g.1) | Apprentice loans under the Apprentice Loans Act, on the same 7-year basis | |
| (h) | Interest on any of the above |
Other debts survive under other rules. Debts incurred after the date of bankruptcy are not included. Co-signers and guarantors remain liable for debts they guaranteed.
The student loan 7-year rule
Paragraph 178(1)(g) says a discharge does not release a debt under a federal or provincial student loan program if the bankruptcy happened before you ceased to be a full- or part-time student, or within seven years after that date.
| Date you stopped being a student | Date of bankruptcy | Government student loan released? |
|---|---|---|
| June 2017 | October 2026 | Yes: more than 7 years |
| June 2020 | October 2026 | No: less than 7 years |
| Still studying part-time | October 2026 | No |
| June 2020 | July 2027 or later | Yes, if no further studies |
The clock runs from when you ceased to be a student, not from when you took the loan. Returning to school, even part-time, restarts the question. Private student lines of credit from a bank are not government student loans: they are ordinary unsecured debts and are released like credit cards.
Hardship relief after 5 years
Under s. 178(1.1), if at least five years have passed since you ceased to be a student, you can apply to the court for an order that the student loan is released. The court must be satisfied that you have acted in good faith regarding the debt and that you have had, and will continue to have, financial difficulty so severe that you cannot repay it. This needs evidence and usually a lawyer or the trustee's help.
Alternatives for student debt
Before filing, check the federal Repayment Assistance Plan for Canada Student Loans and any provincial equivalents: they can reduce payments based on income, sometimes to zero. In Quebec, the Aide financière aux études program has its own rules. A proposal or bankruptcy that cannot touch recent student loans is rarely the best tool if student debt is most of what you owe.
Do these debts survive a consumer proposal?
Generally yes. The BIA applies the s. 178 exceptions to consumer proposals, so support, fines, fraud debts and recent student loans are not released by the proposal unless the creditor explicitly agrees. The proposal can still stop collection on other debts and lower your total monthly payments, which may make the surviving debts manageable.
Secured debts
A mortgage, car loan or secured line of credit is attached to property. Bankruptcy releases your personal promise to pay any shortfall, but the lender can still enforce the security. In practice:
- To keep the property, you keep paying the secured loan.
- If you give the property up, any shortfall after the lender sells it becomes an unsecured debt in the bankruptcy or proposal.
- A secured creditor is not stayed by the bankruptcy in the same way as unsecured creditors; see the stay of proceedings.
Tax debts
Income tax, GST/HST owed personally and CRA overpayments are ordinary unsecured debts in a bankruptcy or proposal, with the special rule in BIA s. 172.1 for large personal income tax debts. Source deductions held in trust (for example, employee withholdings a sole proprietor did not remit) are treated differently. Ask your trustee.
Illustrative example
Jordan owes $14,000 on cards, $9,000 in personal loans, $3,000 in a provincial fine and $22,000 in Canada Student Loans. He ceased full-time studies in May 2021 and files for bankruptcy in October 2026. The cards and loans ($23,000) are released at discharge. The fine ($3,000) survives under s. 178(1)(a). The student loan ($22,000) survives because only about five and a half years have passed. From May 2026 he could already ask the court for hardship relief, or he could use the Repayment Assistance Plan. These figures are hypothetical.
Related: see when the release takes effect in bankruptcy discharge timelines, and how the same exceptions apply in a consumer proposal.
Frequently asked questions
Does bankruptcy stop support payments?
No. Ongoing support and arrears survive and are not stayed. Support enforcement programs can continue to garnish.
Are parking tickets released?
Many provincial and municipal fines are treated as fines under s. 178(1)(a). Ask the trustee how a particular charge is classified.
What about a payday loan?
Payday loans are ordinary unsecured debts and are included and released like other consumer debts.
Will the trustee tell my student loan provider?
Every creditor must be listed. The trustee notifies them, including the student loan program, which will apply the 7-year rule.
Sources
- Justice Laws Website — BIA s. 178 (debts not released by order of discharge) and s. 172.1
- Office of the Superintendent of Bankruptcy — debts that survive bankruptcy
- Government of Canada: student loans — Repayment Assistance Plan for Canada Student Loans
