A Quora user asks: Can tuition debt owed directly to a university (not a loan) be discharged in a bankruptcy?
Victor Fong, Licensed Insolvency Trustee in Toronto, Canada replies:
I’m going to answer your question as it applies to Canada (where I practice).
The general answer is “yes”. It’s only government-guaranteed student loans that are non-dischargeable (unless you’ve been out of school for 7 years at the time you filed bankruptcy).
Now I have two questions: (1) how much do you owe; and (2) in what program were you studying? The reason why I ask is that there’s a very specific situation where the answer might not apply.
If you’re attending law school or medical school and owe a significant amount of money, this may cause problems in you getting discharged from these debts. Generally speaking, according to current case law, loans taken out (be they public or private) to obtain a professional education are not dischargeable. The reasoning is that the education that you receive in law school or medical school is an “asset” that you can use to earn significant income in the future. Therefore, in this specific situation, you’d need to repay the entire loan.