Odell (Re), 2013 BCSC 440

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Odell (Re), 2013 BCSC 440 Date: 20130315 Docket: 12-4327 Registry: Victoria In Bankruptcy and Insolvency In the Matter of the Bankruptcy of Liam Albert Odell Before: Master Bouck (Sitting as Registrar) Reasons for Decision Counsel for the Applicant: H. Wellman Counsel for Attorney General of Canada on behalf of Her Majesty the Queen in Right of Canada as Represented by the Minister of National Revenue: M. Lawless Place and Date of Trial/Hearing: Victoria, B.C. February 18, 2013 Place and Date of Judgment: Victoria, B.C. March 15, 2013 Introduction [ 1 ] This is an application brought by a now discharged bankrupt pursuant to s. 178(1) (

g) and 178(1.1) of the Bankruptcy and Insolvency Act , R.S.C. 1985, c. B-3 (the “ BIA ”). [ 2 ] Specifically, with the requisite five-year period having now passed, Mr. Odell wishes to rid himself of any obligation to re-pay his student loans. The amount of the debt outstanding as of the date of the hearing is $56,933.98. [ 3 ] While the student loans were advanced by both the Federal and Provincial Crown, only the former opposes the application. [ 4 ] The Federal Crown submits that the applicant has met neither the good faith nor the financial hardship test under s. 178(1.1) . Facts [ 5 ] Mr.

Odell’s past and present circumstances are set out in his affidavits filed December 19, 2012 and January 8, 2013. He is 39 years old, living in a common law relationship and the father of two children (ages 13 and 11). [ 6 ] The student loans in question were advanced between 1996 and 1999. [ 7 ] Relying on these funds, Mr. Odell obtained a Bachelor of Arts from the University of Victoria in 1999. [ 8 ] Mr. Odell also used the funds advanced during his subsequent enrollment in the Masters of Public Administration (“MPA”) program at the University of Victoria. It appears from the evidence that Mr.

Odell had no specific completion date for the MPA degree. [ 9 ] During the MPA studies, Mr. Odell worked part-time, married and became a father. [ 10 ] In May 2003, Mr. Odell and his wife separated. With the separation, Mr. Odell found himself in financial difficulties. In July 2003, he quit the MPA program to look for full-time work. [ 11 ] Between 2003 and 2006, Mr. Odell was able to obtain employment with the B.C. provincial government and in the private sector, although none of the positions became permanent. Mr.

Odell estimates his net monthly earnings during these years at between $2,048 and $2,600. [ 12 ] Mr. Odell eventually found permanent full-time employment with the B.C. Ministry of Health in 2007. He remains in this employment with a current annual salary of about $61,000.

[13] Mr. Odell was required to begin re-payment of the student loans in 2004. He deposes to having lost much of the relevantpaperwork but says that interest on those loans was paid in 2005 ($300) and 2007 ($100). This is the only sworn evidence of paymentsmade by the applicant. [14] Since 2006, Mr. Odell has paid child support to his former wife. The child support paid has not always been in accordance withthe Federal Child Support Guidelines. Mr. Odell says that he has care of his children “almost half time” and now pays support of $879per month.

While no court orders or agreements were in evidence, the payment of $879 per month coincides with an income of $58,000to $58,999. [15] In addition, between 2006 and 2010, Mr. Odell paid childcare costs of about $1,400 annually. Mr. Odell says that he still owesthe childcare provider some $1,200 and is indebted to the Medical Services Plan of B.C. There is no evidence of any collection effortsbeing made by these third parties; a monthly payment towards these debts has been factored into Mr. Odell’s family budget. [16] In September 2009, Mr. Odell made an assignment into bankruptcy.

At the time of his assignment, Mr. Odell’s monthly incomewas $2,938.94. [17] Mr. Odell declared assets of $10,830 and unsecured liabilities of $69,707.86. The cumulative student loan debt represented 76%of these liabilities. [18] The reasons for the bankruptcy are stated to be that Mr. Odell “suffered a relationship breakdown in 2003, pays high childsupport and is unable to meet his high debt”. The student loan debt is not specifically mentioned as a reason for the bankruptcy.Presumably, Mr.

Odell was aware that this debt would survive his discharge from bankruptcy. [19] During the bankruptcy term, the trustee calculated surplus income based on a family unit of two, being Mr. Odell and his twochildren who were in his care “1/2 time”. Mr. Odell was not required to pay surplus income during the bankruptcy term. [20] It is not clear when Mr. Odell commenced his present common-law relationship. In any event, this individual has declined toreport income for the purposes of calculating surplus income. [21] The bankrupt was automatically discharged on June 25, 2009. [22] Mr.

Odell’s employment income has steadily increased since 2009. His net monthly income is now $3,852.90. No furtherpayments have been made towards the student loan debt, although Mr. Odell is contributing to a Canada Payroll Savings accountthrough his employment. As of September 2012, the year to date savings amounted to $400. Discussion [23] Sections 178(1) (

g) and 178(1.1) of the BIA provides as follows: 178.

(1) An order of discharge does not release the bankrupt from ... (

g) any debt or obligation in respect of a loan made under the Canada Student Loans Act, the Canada Student Financial Assistance Act orany enactment of a province that provides for loans or guarantees of loans to students where the date of bankruptcy of the bankruptoccurred (

i) before the date on which the bankrupt ceased to be a full- or part-time student, as the case may be, under the applicable Act orenactment, or (ii) within seven years after the date on which the bankrupt ceased to be a full- or part-time student; or ... Court may order non-application of subsection (1)

(1.1) At any time after five years after a bankrupt who has a debt referred to in paragraph (1)(

g) ceases to be a full- or part-time student,as the case may be, under the applicable Act or enactment, the court may, on application, order that subsection (1) does not apply to thedebt if the court is satisfied that (

a) the bankrupt has acted in good faith in connection with the bankrupt’s liabilities under the debt; and (

b) the bankrupt has and will continue to experience financial difficulty to such an extent that the bankrupt will be unable to pay the debt. [24] The applicant must meet both the good faith and financial hardship test in order to be granted the relief sought. [25] The good faith test has been discussed in a number of authorities, including: Kelly (Re) (2000), (ON SC), 20 C.B.R. (4th) 251 (Ont. S.C., Registrar); Lundrigran (Re), 2012 NSSC 231; Fournier (Re), 2009 CarswellOnt 3522 (Ont.

S.C.,Registrar); and in B.C., Swann (Re), 2001 BCSC 1175. [26] In determining whether an applicant has acted in good faith, the bankruptcy court looks to a number of non-exhaustive factors.The applicant should demonstrate a “faithfulness to one’s duty and obligation” and “an honest and sincere intention to fulfil one’sobligation”: Lundrigan (Re) at paras. 14 and 15. [27] Some of the relevant factors are set out below, along with my findings:

a. Was the money used for the purpose loaned? Yes. b. Did the bankrupt complete his education or make an honest effort to do so? The applicant made an honest effort to complete his MPA but abandoned the endeavour due to family and financial commitments. c. Did the bankrupt derive a benefit? Yes, participation in the MPA program assisted Mr. Odell in obtaining his position with the Ministry of Health. d. Did the bankrupt make reasonable efforts to pay the loan or did the bankrupt make an immediate assignment?

While the bankruptcy assignment was made some five years after the loan became due, I am unable to find that Mr. Odell made reasonable efforts to re-pay the loans during that five-year period or indeed subsequent to his discharge from bankruptcy. It is appreciated that Mr. Odell suffered some financial difficulties upon his marital breakdown but the evidence is very scant with respect to his efforts to meet the student loan obligations. Indeed, Mr. Odell did not even keep an accurate record of payments made towards the loan. It would appear that Mr. Odell placed no priority on paying this debt. e.

Did the bankrupt take advantage of other options such as interest relief or loan remissions? Yes. The applicant deposes that he attempted to negotiate a settlement with Canada Student Loans although he does not say when those negotiations were pursued. He also deposes to having spoken to a loan officer at Coast Capital -- apparently with respect to a consolidation loan of some sort -- but was told that the resulting monthly payments were unaffordable. Again, the affidavit material does not address the timing of these discussions. f. Was the bankrupt extravagant or irresponsible ? No. g.

Was the bankrupt required to pay surplus income during the bankruptcy term? No [ 28 ] The determination of whether the applicant has demonstrated good faith is not a matter of simply tallying up the positive and negative answers to the questions posed above. [ 29 ] What is most concerning is that no efforts whatsoever have been made towards payment of this debt since Mr. Odell’s discharge from bankruptcy. Notably, Mr. Odell’s contribution to savings for nine months in 2012 is equivalent to the amount paid on the student loan debt over the past eight years. [ 30 ] This is a borderline case.

The onus is on the applicant to demonstrate good faith. Weighing all of the relevant factors, I am unable to find that Mr. Odell has acted in good faith with respect to the student loan debt. [ 31 ] Mr. Odell may re-apply in two years’ time for the relief sought but must demonstrate some effort to pay the student loan debt during that period: Lau (Re), 2010 BCSC 274 . [ 32 ] Given my finding with respect to the good faith obligation, it is not necessary to address the financial hardship test. “C.P. Bouck” Master C. P. Bouck