nan IN THE SUPREME COURT OF NOVA SCOTIA IN BANKRUPTCY AND INSOLVENCY Citation: Herve (Re), 2008 NSSC 216 Date: July 7, 2008 Docket: 31951 Registry: Halifax District of Nova Scotia Division No. Sydney Court No. 31951 Estate No. 51-095527 IN THE MATTER OF THE PROPOSAL OF WILLIAM BLAIR HERVE LIBRARY HEADING Registrar: Richard W. Cregan, Q.C. Heard: June 26 2008 Written Decision: July 7, 2008 Subject: Application to be discharged from liability for student loans under Subsection 178(1.l) of the Bankruptcy and Insolvency Act. Summary: A school teacher owed approximately $20,000 in student loans. His wife works half time. They have two young children. They have extensive expenses for the care of their children and for transportation, he having to make daily round trip of 250 km to his school. Any surplus he might have would be minimal. They have reasonably frugal lifestyle. Issue: The Attorney General did not question his good faith in past dealings with his loans. However, it contested whether he has and will continue to experience financial difficulty so as to be unable to pay the debt. Result: It was held that he has such financial difficulty and was granted relief. THIS INFORMATION SHEET DOES NOT FORM PART OF THE COURT’S DECISION QUOTES MUST BE FROM THE DECISION, NOT THIS LIBRARY SHEET IN THE SUPREME COURT OF NOVA SCOTIA IN BANKRUPTCY AND INSOLVENCY Citation: Herve (Re), 2008 NSSC 216 Date: July 7, 2008 Docket: 31951 Registry: Halifax District of Nova Scotia Division No. Sydney Court No. 31951 Estate No. 51-095527 IN THE MATTER OF THE PROPOSAL OF WILLIAM BLAIR HERVE nan Registrar: Richard W. Cregan, Q.C. Heard: June 26, 2008 Present: Mark Zinck representing the bankrupt, William Blair Herve Michael Connor representing the Trustee, BDO Dunwoody Goodman Rosen Inc. Dwight Rudderham representing The Attorney General of Canada, on behalf of Her Majesty the Queen [1] The Applicant, William Blair Herve, asks for an order under Subsection 178(1.1) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, (BIA) that Subsection 178(1)(g) does not apply to his outstanding student loan debt. The application is opposed by the Attorney General of Canada. [2] In the course of the hearing counsel for the Attorney General advised that it does not question Mr. Herve’s good faith with respect to the loan. Accordingly, shall only review what find to be evidence respecting the other requirement under this subsection, namely whether his financial difficulty is so extensive that he will be unable to pay his liabilities under the loan. [3] Mr. Herve filed Consumer Proposal on July 25, 2001, which requires him to pay $300 per month. It was successfully completed. He received Certificate of Full Performance in October 2006. [4] His student loan debt including interest is now approximately $20,000. [5] He commenced his university education at St. Francis Xavier University in September 1989, and graduated with Bachelor of Science in Physical Education in May, 1997. Interspersed with these studies was time spent as labourer with the Nova Scotia Department of Highways and courses at the University College of Cape Breton. [6] Since September 1997 he has been employed as physical education teacher with We’koqma’q First Nation Elementary School in Whycobah which is located on Highway 104, approximately 125 km from Sydney. In the first year his salary was approximately $24,000. His gross annual salary is presently $50,874. He is now at the top of the pay scale for his position. [7] In 2001 he married Beverley Herve. They now have two children, daughter born in September 2004 and son born in November 2006. [8] His wife has job share position with Aliant in Sydney. She works every second week. She looks after the children during the weeks off. This position is permanent. Presently, there is no opportunity to return to full time work with Aliant. Her present annual salary is $16,272. [9] He says he does not have the ability to pay his student loan debt. The family expenses exhaust the family income. He has no credit, nor does his wife whose credit cards now have maximum balances. He worries about what would happen in emergencies, such as repairs for his car which he drives to work each day, 250 km round trip. [10] They bought their present home in May 2003, for $122,500. It was completely financed by mortgage with the Royal Bank. They had looked for less expensive home but could not find one in good condition. The less expensive homes on the market required extensive work. Neither of them have skills in this area. The monthly mortgage payment is $730. Taxes are another $175, heating another $125. [11] They live in Sydney rather than near his school. Mrs. Herve works in Sydney. It is better place to bring up their children. [12] They have two cars, one to serve as backup so that he can be confident he will be able to drive to school each day. Driving 250 km per school day is substantial expense, but do not see any reasonable alternative. doubt that there would be comparable work for Mrs. Herve in Whycobah. [13] There are number of credit cards in Mrs. Herve’s name which require minimum monthly payments in total of about $1000. [14] do not think there is anything extravagant about their life style. [15] The expenses for their children are substantial. They have day care during the week Mrs. Herve works. This will continue for several years. As children grow their reasonable requirements expand. [16] They might be able, if they could pay off their credit card debts and maintain an even more frugal life style find some surplus to pay toward the student loan debt, but cannot see that it would reduce it very much over the foreseeable future. [17] The BIA allows me only to make finding that Mr. Herve “has and will continue to experience financial difficulty to such an extent that (he) ... will be unable to pay the liabilities under the loan.” The debt in effect can either be cancelled or affirmed. No middle ground is available. [18] I think that allowing him a reasonably frugal family lifestyle, which is what he has, will not permit him to pay his liabilities for this loan. [19] Using the Superintendent’s Standards he may have a monthly surplus of about $170. It would take many years for him to contribute enough to significantly reduce this liability. [20] If I refuse this application, Mr. Herve will have to consider bankruptcy to eliminate this liability. [21] am satisfied that Mr. Herve does not have the resources to discharge this liability now, nor in the next several years. [22] He is entitled to relief under Subsection 178(1.1) of the BIA. [23] If costs are sought shall hear counsel. R. Halifax, Nova Scotia July 7, 2008
The applicant school teacher asked to be discharged from $20k in student loan debts under s.178(1.1) of the Bankruptcy and Insolvency Act. He had filed consumer proposal in 2001, which he completed successfully in 2006. He earned $50,874 (gross) per annum; was at the top of his pay scale; had two young children; and his wife worked half-time position at Aliant, earning $16,272 year. There were daycare costs when the wife worked, and the applicant's transportation costs were high (but reasonable). The wife had significant debts and no remaining credit; she paid around $1,000 month to service her cards. The applicant did not have any credit either. Their home had little, if any, equity. The AG agreed the applicant had acted in good faith, but contested whether he was (and would continue to be) unable to pay the debt. Application allowed. Permitting the applicant's family a reasonably frugal lifestyle, which the court found they had, would mean he could not pay off the loan. Using the Superintendent's standards, there might be a small surplus in the family budget, but it would take many years for the applicant to significantly reduce his liability. If the application were refused, he would have to consider bankruptcy.