IN THE SUPREME COURT OF NOVA SCOTIA
IN BANKRUPTCY AND INSOLVENCY
Citation: Hankinson (Re), 2009 NSSC 211
Date: July 3, 2009
Docket: B 31621
Registry: Halifax
District of Nova Scotia
Division No. 01 - Halifax
Court No. 31621
Estate No. 51-953181
In the Matter of the Bankruptcy of Lanny Edward Hankinson
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D E C I S I O N
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Registrar: Richard W. Cregan, Q.C.
Heard: May 22, 2009
Present: Lanny Hankinson, the bankrupt, representing himself
Charlene Hartlen representing the Trustee,
PricewaterhouseCoopers Inc.
Susan Taylor representing the Department of Justice
[1] This is an application by Lanny Edward Hankinson for an order pursuant to Section 178(1.1) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the “Act”), in which he asks to be discharged from three outstanding student loans not discharged by his assignment in bankruptcy made on April 24, 2007. He received a conditional discharge on May 23, 2008. It requires him to pay $2,660.66, by monthly payments of $133.03. I understand these payments are up to date.
[2] The loans are held by the Canada Student Loan Program, the Royal Bank of Canada and the Province of Nova Scotia and had approximate balances at the time of assignment of $8,600, $8,300 and $7,600 respectively. He completed the education for which he borrowed this money in 2002, less than seven years before he made his assignment. Section 178 (1)(g) mandates that seven years must pass from the ceasing to be a student before making an assignment, if such loans are to be discharged by bankruptcy.
[3] His total debts on bankruptcy were $56,900. The student loans totalled $24,500. Of the remaining $32,400, $21,400 was owed to several financial institutions. He attributed his bankruptcy to living on credit during a nine month layoff shortly after he completed his education.
[4] His application is opposed by the Attorney General of Canada, representing the holder of the first mentioned loan. The holders of the other two loans have not responded.
[5] At the commencement of the hearing Susan R. Taylor, Counsel for the Attorney General, advised the Court that, although her client had been served with notice on time, it had only instructed her a day or two before. She asked that the hearing be adjourned to allow her to properly prepare the objection. Mr. Hankinson lives in Ottawa. He had incurred significant expenses and loss of a day’s pay to come to Halifax without notice of any objection to his application and with reasonable expectation that the matter would be dealt with that day. He objected to any adjournment. I was inclined to grant the adjournment but only with an undertaking from the Attorney General to pay Mr. Hankinson’s expenses and lost pay which would result from returning again to Halifax. Ms. Taylor’s instructions were that such undertaking would not be made, so we proceeded with the hearing.
[6] Mr. Hankinson used these loans to finance his education primarily at the Radio College Canada (“RCC”) from which he graduated as a Computer Network Engineering Technician on September 3, 2002. Shortly thereafter he commenced employment in that field but it only lasted four months. He was not able to work the following nine months. Since then he has not been able to find work in this field. With the rapid development of technology, his training soon became of little marketable value.
[7] He has, however, been resourceful in finding employment at call centres and similar places primarily in workforces management. These jobs tend to be short term because there is considerable volatility in these industries. The work is often sent offshore. He reports the following income since 2002:
2002: $8,056.00
2003: $10,733.36
2004: $26,444.16
2005: $33,394.46
2006: $36,544.75
2007: $48,158.12
2008: $27,980.59
[8] He was again unemployed for nine months in 2008.
[9] His present employment which began in late December 2008 is in Ottawa with Environment Canada on a casual (temporary) basis. This employment will end in September this year. He has not been able to find any employment to follow. He does not have any expectation of employment with the Federal Government. The process he must go through is complicated by his present status.
[10] He constantly follows job advertisements and applies for all that have potential. He reports he has made 1270 applications and only been granted one interview. He says that his lack of a university degree filters out 80% of these applications and many of his applications to government agencies are filtered out because he is not bilingual.
[11] He apparently has a sustained relationship with a woman, but said nothing of it except that he had just learned that he would be a father in eight months. He is looking forward to this and has concerns as to how he will be able to meet its responsibilities. I note that the Section 170 report indicates that there are two persons in the household family unit.
[12] In his present position he is paid $25 an hour and works 37.5 hours a week which is approximately $49,000 per annum.
[13] This income is enough to require him to be paying $133 each month as a condition of his discharge. I do not know what his actual take home pay is. He did not provide a detailed list of his expenses, but assured the court that he lives from cheque to cheque and has no extravagances. I accept these assurances.
[14] He made payments early on totaling $600 on the first loan. His 2004, 2005, and 2006 tax refunds and GST cheques were seized and applied to it. He had some discussion with the administrators of this loan about making manageable payments. They insisted that he pay $400 per month. Nothing less would be receivable by them. He did not have the resources to meet this demand. He reports that they treated him quite abusively and as well called his parents. However, he was able to regularly make payments on the other two loans. It is now more than five years since Mr. Hankinson ceased to be a student.
[15] Let me quote Subsection 178(1.1), the provision under which this application is made.
(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 the debt 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.
[16] He must prove that he has acted with good faith and that he has and will continue to experience financial difficulty.
[17] Re Minto (1999), 14 C.B.R. (4th) 235 (Sask., Registrar Herauf) is often referred to for its list of factors relevant to the determination of good faith. In paragraph [62] he says:
I agree with counsel that in the context of student loans one can look at certain factors considered in determining whether a condition should be imposed on the discharge of a bankrupt with student loan liabilities; namely, whether the money was used for the purpose loaned, whether the applicant completed the education, whether the applicant derived economic benefit from the education (ie: is the applicant employed in an area directly related to the education), whether the applicant has made reasonable efforts to pay the debts and whether the applicant has made use of available options such as interest relief, remission, etc.
[18] Registrar Sprout in Kelly, Re, 2000 CanL II 22 497 (Ont., S.C.) after referring to these factors added:
- the timing of the bankruptcy, and
- whether the student loan forms a significant part of the bankrupt’s overall indebtedness as of the date of bankruptcy.
[19] I would add the following:
- whether the applicant had sufficient work and income to be reasonably expected to make payments on the loan,
- the lifestyle of the applicant,
- whether the applicant has had sufficient income for there to be surplus income under the Superintendent’s standards,
- what proposals the applicant may have made to the loan administrators and the responses received, and
- whether the applicant was at any time disabled from working by illness.
[20] Ms. Taylor emphasized that the burden is on the applicant to prove that he has acted in good faith. It is not enough for the applicant to simply say that “I have acted in good faith”. Evidence must be given of the particular dealings of the applicant.
[21] Referring to the factors listed above let me comment on the evidence received.
[22] Mr. Hankinson’s education for which he received the loans was directly used only for the period of four months before he was laid off. Although the education may well have had value in a general way, it was of no further specific use, because he has not been able to find further work in that technology. In fact this technology is now somewhat dated.
[23] He repaid $600 of the Federal loan. He was not able to make the monthly payments of $400 demanded by the collectors. They wanted $400 or nothing and treated him abusively. He directed what surplus income he had to paying the other loans and generally was able to keep them current. It is not clear whether he made any use of interest relief or revision terms. Eligibility for this relief has several conditions that may make the relief impractical. This may well be academic as I am satisfied that he acted reasonable in paying what he could. It must be remembered that he was unable to work for a long period (nine months) shortly after he finished his studies. Also in 2008 he had a similar period of unemployment.
[24] The evidence on his expenses is rather thin. However, I can understand his assertion that he lives from cheque to cheque. His evidence is that he had to make use of credit facilities to get him through a long period of unemployment. He attributes this to the cause of his bankruptcy.
[25] Although it would have been helpful to have more specific details, I am satisfied he has been living in a frugal manner since graduation. He had dealt with his creditors in a reasonable way. There is nothing to suggest an excessive lifestyle or spending money irresponsibly. Based on these considerations I find that he has acted in good faith with respect to all three loans.
[26] As to financial difficulty it is clear that his earnings have been limited the past two years. There was the period of unemployment followed by his present work which has only been paying him modestly. His present contribution of surplus income of $133.03 per month which will continue until the end of the year is a rather small amount. It is material to the present question in the sense that it shows he has little to spare. He does not have employment beyond the present which ends in September. He is working hard to find something in a stressed economy. His technical training is now dated. His experience has been primarily in call centre management and the like where tenure of any consequence is generally unknown. He is a resourceful and articulate person and will find work, but his concern that he will have difficulties over the next year or more are well founded. He will have the additional responsibility of supporting his expected child.
[27] In the Bankruptcy of Allan David Pyke, 2005 NSSC 33 I reviewed in paragraphs [43] to [47] the cases on this point, namely:
Re Kelly (2000), 20 C.B.R. (4th) 251 (Ont., Deputy Registrar Sprout), and
Re Minto (1999), 14 C.B.R. (4th) 235 (Sask., Registrar Herauf)
Re Wood (1998), 7 C.B.R. (4th) 23 (Man., Registrar Ring)
[28] Let me again quote certain passages.
From Re Kelly, in paragraph [44]:
The issue as to whether a bankrupt “will continue to experience financial difficulty” will in most cases pose the biggest obstacle for bankrupts bringing a subsection 178(1.1) application. The BIA does not provide any guidance to the court as to the appropriate duration of time into the future wherein the bankrupt must experience this financial difficulty.
From Re Minto, in paragraph [46]:
In my view, I do not think it would be possible to set a specific time period to coincide wit the term “will continue”. The period will be dependent upon the facts in each situation.
From Re Wood, in paragraph [47]:
The bankrupt’s claim that he acted in good faith was not seriously challenged and is accepted by the court. The continuing financial difficulty is more difficult to assess but the court is satisfied that the bankrupt’s income will remain close to its present modest level for the next two to three years.
[29] I take from these cases that one has to be careful in determining how far one looks into the future. There are all sorts of possibilities but it is difficult to make predictions. Will he find a new job for September? Maybe, but maybe he may face a period of unemployment. However, one can fairly assume that, when he does find employment, his income will not significantly increase considering the present economy. He will have new demands on his resources and his financial situation will be as strained as it is now or more.
[30] If relief is not granted in this application, he will have the option upon receiving the absolute discharge of his present bankruptcy, to make a new assignment which with the passage then of seven years from his completing his studies will result in these loans being discharged.
[31] Considering his past and present circumstances and looking into the next two or three years, I do not think the circumstances demand that I look further. I think he will be doing well to find work and income comparable to what he presently has. I think this means he not only has but will continue to experience financial difficulty to such an extent that he will be unable to pay what in his circumstances is a considerable debt.
[32] He is entitled to an order under Section 178(1.1) respecting all three loans.
R.
Halifax, Nova Scotia
July 3, 2009