Mr. Speaker, the Bankruptcy and Insolvency Act is one of Canada's key marketplace framework laws promoting both economic and social stability. Indeed, it is unique in its dual economic and social orientation encouraging commerce and entrepreneurship while ensuring that vulnerable individuals have a means of dealing with unmanageable debt. The statute has been crafted to reflect the balance between these orientations.
The Bankruptcy and Insolvency Act balances the risk between creditors and debtors in determining how shortfalls will be allocated and setting out the circumstances under which a fresh start is warranted. It encourages the payment of debts while allowing well-intentioned but unfortunate debtors a means of eliminating their debt loads.
It has been argued in the House that former students face crushing debt loads without the recourse to bankruptcy offered to other debtors. It is argued that individuals with student debts are unfairly hampered by the bankruptcy system, forced to live with debt levels that would otherwise qualify for bankruptcy protection.
I suggest that these arguments present only half the picture. It is true that student loans are not easily discharged under the Bankruptcy and Insolvency Act but bankruptcy is a last option, not a first option.
Before condemning the rules and changing them, we must understand the rationale for their creation. The Bankruptcy and Insolvency Act was amended in 1998 after careful consideration by Parliament to stem the increasing option of declaring bankruptcy rather than paying student loans.
In the years leading up to the amendments, losses to the Canadian student loans program due to bankruptcies were becoming unsustainable. For the fiscal year 1995-96 alone the cost of losses due to bankruptcy was more than $100 million. Losses of that magnitude threatened the viability and the continued existence of that program.
A look at the statistics suggest that bankruptcy was being treated as a first option by student loan holders. Many of the bankruptcies were filed shortly after the former student left the school and before any effort was made to repay the loans. Bill C-236 would encourage a return to this sort of behaviour.
The Bankruptcy and Insolvency Act was changed in 1998 to discourage students from taking the plunge into bankruptcy but it does not work in a vacuum. It works in tandem with the Canadian student loans program which is constantly being improved. For example, in the recent budget the government announced plans to improve the debt forgiveness provisions applicable to students who face the most serious hardships, including those who suffer permanent disabilities, while repaying their loans.
The Canada student loans program has evolved to ensure the mechanisms are in place to help individuals in financial distress, including interest free periods and debt forgiveness. Student loan debtors do not have to resort to bankruptcy. They can look to the student loans program and seek relief there.
Bankruptcy is still available for people in need. Individuals with student debt can opt to seek bankruptcy protection and have their non-student loans forgiven. This combined with the interest relief and debt forgiveness provisions of the Canada student loans program is sufficient to allow must students with debt troubles to become financially stable and capable of paying their loans.
If someone suffers from continued hardship and remains unable to pay his or her loans, the Bankruptcy and Insolvency Act allows a person to obtain a discharge on hardship grounds. To obtain such a discharge, the person must have demonstrated good faith in dealing with the loans and that the financial hardship will likely continue over the foreseeable future.
To be certain, obtaining a hardship discharge is not easy but it should not be easily obtained. Student debt holders must not be encouraged to opt for bankruptcy until the option for bankruptcy is the only possible route. They should take advantage of the protective measures offered by the student loan program and attempt to pay their debts.
This is economically responsible behaviour and it is socially responsible behaviour. It is economically responsible because it ensures that those who benefit from the loans make reasonable efforts to pay them back and socially responsible because paying one's debts back is a good thing.
Governments ensure easy access to loans in order to allow people to pursue a goal of education but we must not forget the taxpayers ultimately pay the cost of losses due to bankruptcy. Student loans are funded through tax dollars. Allowing easy access to bankruptcy and making that option more attractive than repaying loans unfairly increases the burden on the taxpayer.
Easier access to bankruptcy, as contemplated by Bill C-236, also poses a threat to future students. We have seen what easier access to bankruptcy did in the past, leading to massive losses to the student loans program and threatening its continued existence. The program is an essential one, designed to benefit Canadians today and in the future. If people are allowed to abuse the system, taking money out of it without any repayment, the system will not likely be sustainable.
Is it fair to allow former students to take the easy way out at the expense of taxpayers? No, it is not. Allowing students to pursue bankruptcy as an option only two years removed from school is an unsound prospect. It does not encourage former students to pay their debts or to use the debt repayment portion of the Canadian student loans program. It does not provide sufficient time to assess whether the individual will be able to capitalize on his or her education and earn a good living, nor does it provide time to accurately assess whether the individual will be able to pay back the money borrowed from the taxpayers.
Education is not free. It is a valuable resource and one that must be worked for and respected. Loans are provided for prospective students with the understanding that they will be repaid. The student loans program provides people with the time to start their post-study lives and build their careers before requiring them to pay the interest or repay their loans. We should encourage people to use these methods rather than opting for bankruptcy.
Change to the Bankruptcy and Insolvency Act should not happen in a vacuum. It should be handled as part of a comprehensive reform that is capable of ensuring continued balance within the statute and its relationship to other statutes. Changing this provision would throw off the balance and create disharmony between it and the Canada student loans program.
The government is currently reviewing the Bankruptcy and Insolvency Act and is preparing legislative reform options. The issue of student loans is being carefully considered and should be handled in the context of a comprehensive reform rather than a stand alone item. The government cannot support Bill C-236.