Student Loans In Bankruptcy Hardship Applications

Understanding Student Loans in Bankruptcy: A Comprehensive Guide on Hardship Applications

Navigating student loans can be a daunting task, especially when faced with the prospect of bankruptcy. This comprehensive guide will help you understand the intricacies of applying for hardship in such instances.


In times of financial distress, many individuals are forced to consider bankruptcy as a last resort. With respect to student loans, the law provides certain provisions for those who find themselves in such circumstances.

Historical Perspective

Historically, a ten-year rule was in effect which stated that individuals could only be released from their student loan debts if they had ceased attending school more than ten years prior to filing for bankruptcy. However, this statute has seen modifications over time.

Understanding Bankruptcy

Bankruptcy is a legal process that offers relief to individuals who are unable to repay their debts. It involves the liquidation of assets to settle the debts or the creation of a repayment plan.

The Seven-Year Rule

Recently, the standard was reduced to seven years. This means that individuals who last attended school seven years prior to filing for bankruptcy can be released from their student loan debts.

Hardship Application Process

The revised law also provides for a hardship application process. A person can apply to the bankruptcy courts if they have previously been through a bankruptcy, have been out of school for five years, and can demonstrate continued hardship and inability to repay their student loans.

Good Faith Requirement

To qualify for this, individuals must demonstrate to the court that they have acted in good faith. This requires showing sincere efforts towards repayment and a genuine inability to do so.

Evaluating Repayment Capability

Applicants must also provide evidence of their incapability to make the necessary payments under the student loan. This involves a thorough evaluation of their financial situation, considering income, expenses, and other relevant factors.

Prevalence of Hardship Applications

These types of applications have gained traction recently, though there is no standard definition of what constitutes hardship. Despite the lack of a clear criterion, individuals finding themselves in such situations should contemplate making a hardship application.

Legal Assistance

Engaging a lawyer for this process may be beneficial, but not mandatory. In certain regions, like Saskatchewan, a court hearing may not be necessary if the student loan authorities can be convinced to consent to the application.


The law does not allow courts to order reduced payments, making it an ‘all or nothing’ situation. However, if you find yourself struggling with student loans in bankruptcy, considering a hardship application could be a potential solution.

Key Takeaways


The law permits student loan debt release for those who last attended school seven years prior to filing for bankruptcy.

The hardship application process is available for those demonstrating continued hardship and inability to repay their student loans.

These applications require proof of acting in good faith and inability to make necessary payments.

Legal assistance can be beneficial in navigating this process.

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