In the recent decision of Piekut v Canada (National Revenue), 2025 SCC 13 (“Piekut”), the Supreme Court of Canada (“SCC”) considered when bankrupts are able to discharge their student loans under section 178(1)(g) of the Bankruptcy and Insolvency Act (the “BIA”). Despite confusion across Canada as to whether the “single-date” or “multiple-date” approach applied, the SCC found that a proper interpretation of the text, context, and purpose of section 178(1)(g) mandated the single-date approach. The SCC held that a single-date approach met the statutory objectives of the section, while balancing fairness to student borrowers. Ultimately, this decision provides much needed clarity on the operation of section 178(1)(g) and the scope of dischargeable student loans in bankruptcy.
Background Facts
Pursuant to the BIA, a discharge order releases a bankrupt individual from all claims provable in bankruptcy, except for those listed under section 178(1). Section 178(1)(g)(ii) states that an order of discharge does not release the bankrupt from government student loan debt claims where the bankruptcy has occurred “within seven years after the date on which the bankrupt ceased to be a full- or part- time student.”
While the BIA is clear that government student loans are dischargeable after seven years, determining when a bankrupt has ceased to be a student and when the seven year period has passed has been the subject of much disagreement across Canada. Courts in Québec and British Columbia have followed a “single-date” approach where a bankrupt stops being a student on the last day they finish their last program of study. In Ontario and Newfoundland and Labrador, courts have adopted a different “multiple-date” approach whereby there can be several dates that a bankrupt ceased to be a student depending on the end dates of the bankrupt’s various educational programs.
In Piekut, Izabela Piekut was a student from 1987 to 2009 who filed a consumer proposal in 2013. Piekut pursued a Bachelor of Arts and a teaching diploma from 1987 to 1995, before returning to school in 2002 to 2003 and from 2006 to 2009. Piekut financed her last years of studies (2006 to 2009) herself, but utilized government student loans to finance the rest.
At issue was whether Piekut could be released from her student loan debts through her consumer proposal, given that the period between her ceasing to be a student in her last program of study and filing the consumer proposal was less than the required seven year period.
The Supreme Court of British Columbia rejected the declaration sought by Piekut that she ceased to be a student pursuant to 178(1)(g)(ii) based on the single date approach and the wording of the provision signifying a singular date intended by the legislation. On appeal, the British Columbia Court of Appeal upheld the decision of the Supreme Court utilizing the single date approach.
The Decision
Justice Jamal for the majority of the SCC found that the single-date approach governed the discharge of student loan debts based on the proper statutory interpretation of the text, context, and purpose of section 178(1)(g)(ii).
The SCC began their analysis by comparing the French and English versions of the BIA. The SCC found that the French legislation contained the words “au regard de la loi applicable” qualifying the entirety of section 178(1)(g), rather than merely 178(1)(g)(i) as was the case under the English BIA. Because the French and English legislation must be read together, the narrower French version of the BIA wording applied to constrain the provision beyond what was present in the English legislation. Additionally, the text of section 178(1)(g)(ii) in the French and English versions of the legislation suggested that only one date was to be considered. The provision only referred to a single date, as evidenced by the words “the date” and “ceased” in the English text and “cette date” and “a cessé” in the French text indicating finality.
The SCC then considered the several purposes of section 178(1)(g) and whether they supported the single date approach. Justice Jamal found that all of the several purposes of the provision supported a single-date approach. Indeed, it was found that a single-date approach results in fewer government losses due to student loan defaults, ensures the sustainability of student loan programs, and provides borrowers with a reasonable amount of time to repay their loans, while deterring opportunistic bankruptcies. While the fresh start principle is a key purpose of the BIA, the conclusion that the single-date approach applied was found to be unambiguous and, thus, courts which gave priority to the fresh start principle over the specific purposes of the provision were found to be in error.
Finally, the majority determined that adopting the multiple-date approach would result in absurd consequences whereby a bankrupt could discharge their student loans before making any meaningful effort at repayment. In the view of the SCC, a multiple-date approach could result in an absurd situation where a borrower takes a short break from their first studies, begins a second degree for a continuous seven year period, and then can obtain a discharge of their first degree student loans before a reasonable opportunity has been made to repay the debt. Given legislation must be interpreted to not produce absurd consequences, it was found that the multiple-date approach had to be rejected.
After engaging in their analysis of section 178(1)(g), and considering that Piekut had benefitted from additional measures aimed at providing individuals with student loan relief, the majority found that the single-date approach prevailed.
In dissent, the minority argued that both the single-date and multiple-date approaches resulted in absurd consequences. While the minority agreed with the majority on the absurd circumstances created by the multiple-date approach, they saw the single-date approach as allowing for the impermissible situation where a student who returns to school more than seven years after their initial studies being unable to discharge their student loans for said initial studies, despite having not been a student for the required seven years after their initial degree. As a result, the minority of the SCC would find that section 178(1)(g)(ii) functions as a conditional statutory bar whereby an individual who has ceased to be a student for a seven year period would be able to discharge their student loans for that period.
Implications and Key Takeaways
Ultimately, Piekut brings much needed clarity to when student loans can be discharged under bankruptcy by confirming the single-date approach is to be followed. This clarity is important to borrowers and lenders alike as it provides certainty surrounding the operation of 178(2) and the scope of dischargeable debts in bankruptcy. While Piekut shrinks the scope of dischargeable student loans, the decision fairly balances the ability of students to seek financial assistance with their studies, with the important policy objective of ensuring the sustainability of said student financial assistance programs.
The views and opinions expressed in this article belong to the authors and should not be relied upon as a substitute for independent legal advice. Should you wish to discuss the particular circumstances of a case further, any one of the members of Fasken’s Insolvency and Restructuring team would be happy to do so with you.
