2015 NSSC 263, 2015 NSSC 263

IN THE SUPREME COURT OF Nova Scotia In Bankruptcy and insolvency Citation: McFarlane (Re), 2015 NSSC 263 Date: September 19, 2015 Registry: Halifax District of Nova Scotia Division No. 1 Court No. 33937 Estate No. 51-1129358 In the Matter of Bankruptcy of Sara McFarlane D E C I S I O N Registrar: Richard W. Cregan, Q.C. Heard: August 10, 2015 in Halifax, Nova Scotia Counsel: Kelly A. Peck, for the Department of Justice By the Court: [ 1 ] This is the application of Sara McFarlane under Section 178(1.1) of the Bankruptcy and Insolvency Act . R.S.C. 1985, c.

B-3 ( BIA ) to be relieved of her outstanding student loan debts. [ 2 ] Ms. McFarlane first studied at the University of King’s College and completed a major in French and History in 1993. She then attended Mount Saint Vincent University from where she obtained the degree of Bachelor of Public Relations in 1996. Later she studied at Université Saint-Anne from where she obtained the degree of Bachelor of Education in 2007. [ 3 ] During her years of study she obtained student loans which were guaranteed by the Federal Government.

The loans for the first two degrees are characterized as CSL 1 and have an outstanding balance as of July 29, 2015 of $1,258.07. The loans for her studies at Sainte-Anne are characterized as CSL 4. They have an outstanding balance as of July 24, 2015 of $20,521.10. [ 4 ] Canada Revenue Agency (CRA), the agency responsible for collection of these loans, opposes this application. [ 5 ] While studying for her B.Ed. she had been separated from her husband. He had during that time without informing her made an assignment in bankruptcy.

This left her responsible for their joint debts and resulted in her also having to make an assignment in bankruptcy in 2008. She received an absolute discharge on September 22, 2014, having had to pay as the condition of her discharge $5, 419. [ 6 ] She and her former husband have three children. They live with her. She receives support for them from him. [ 7 ] Ms. McFarlane provided the court with the following particulars of her expenses and income. Typical Monthly Expenses: Rent $1395

NSP $ 315 Cell $ 160 Eastlink $ 130 Orthodontics $ 130 Insurance $ 330 Car $ 250 Health $ 350 Groceries $1100 Extracurricular $ 500 Clothing, etc. $ 200 Total $4860 Monthly Income: Pay $1683 x 2= $3366 CTB $ 318 Child Support $1176 Total $4860 Her total monthly income is $4,860. The Superintendent’s standard for a family of four is $3,831. Accordingly she has approximately $500 of surplus income. However, it may well be that she has necessary expenses which should be reflected in determining surplus income. She may have little, if any, actual surplus.

The surplus income approach to whether she shall continue to experience financial difficulty may not be a reliable approach. [ 8 ] However, I have concern as to whether the expenditure of $500 per month on her older son’s dancing activity can be justified. He takes lessons and attends international competitions in such places as Calgary. It is an amount that, if applied to her student loans, could well discharge them in five years. [ 9 ] I note that she refers to this expense as “extracurricular”. This would suggest that it is an expense which goes beyond the reasonable expenses of supporting a family.

It is difficult to justify as against Ms. McFarlane paying back the money she has borrowed to be able to have a good education and employment as a teacher. [ 10 ] The case law on this point is well known. I reviewed it in some detail in Re Pyke, 2005 NSSC 33 . Student loan debts are not like other debts. They normally benefit one with an education and increased earning capacity, a lasting asset. One has a special responsibility to repay the loans proportionate to the benefit. Ms. McFarlane has a permanent teaching position.

However, she notes a certain precariousness about her health which gives her a significant sense of insecurity. She only has so many sick days. Each year she exhausts these days. She has a significant sense of insecurity because of this. [ 11 ] She says she lives pay cheque to pay cheque. She consults with a naturopathic doctor and has to pay for the supplements prescribed. [ 12 ] Her daughter requires orthodontic treatment. Her younger son is treated by a naturopathic doctor.

He has some health issues requiring extra expenses. [ 13 ] To qualify for relief under Section 178(1.1) one must prove that one has acted in good faith and will continue to experience financial difficulty. [ 14 ] I am not satisfied that Ms. McFarlane, after reasonably providing for herself and her family at the present time, is not able to pay this debt over a reasonable period of time. [ 15 ] Her overriding concern as expressed at the hearing was that her health is precarious and thus she misses time from work beyond her sick day allowance.

Anticipation of the future is not an acceptable reason for granting relief. As counsel for CRA submitted, this application is premature. If her health fails and she is unable to work, she may then well have a good case for relief. [ 16 ] I am not satisfied that, on what is before me, she has met the second test, namely that she will continue to experience financial difficulty to such an extent that she will be unable to pay this debt. [ 17 ] This application is dismissed. However, if there is a material change in her circumstances, she will be at liberty to make a new application.

In the meantime she should keep thorough records of her income and expenses so that the court will be thoroughly informed of her situation in any future application.

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