School Goes Bankrupt: How Ontario and British Columbia Students Can Claim Tuition Refunds

When a private career college or private training institution suddenly closes because of financial problems, students may assume the school has “gone bankrupt” and that tuition will automatically be refunded from a government-held bond. The legal position is more complicated. Bankruptcy is a federal insolvency process, while Ontario and British Columbia operate separate provincial systems intended to protect eligible students when regulated education providers cease operating.

For students, the most important point is that formal bankruptcy is not always required before provincial tuition protection becomes available. A school may stop operating, lose its certificate, discontinue a program or enter insolvency proceedings. The applicable provincial legislation determines whether training completion or a tuition refund is available.

What does bankruptcy mean and what normally happens?

Under section 2 of the federal Bankruptcy and Insolvency Act, “bankrupt” is defined as a person who “has made an assignment or against whom a bankruptcy order has been made.” Bankruptcy therefore has a specific legal meaning. A business experiencing cash flow problems or unable to refund students may be insolvent without yet being legally bankrupt.

Once formal bankruptcy occurs, a Licensed Insolvency Trustee, commonly called an LIT, administers the bankruptcy estate. The federal insolvency process and the provincial student protection process may then operate at the same time.

The general bankruptcy process normally involves:

• The institution becomes unable to meet its financial obligations and may consider restructuring, a proposal or bankruptcy.
• Bankruptcy may begin through a voluntary assignment or a bankruptcy order made by a court.
• A Licensed Insolvency Trustee takes responsibility for administering the bankruptcy estate.
• A stay of proceedings generally prevents unsecured creditors from continuing normal collection or legal proceedings against the bankrupt debtor.
• The trustee identifies and realizes assets available to the bankruptcy estate.

Students who are owed money may become creditors and should submit Form 31, Proof of Claim, with supporting evidence such as the enrolment contract, receipts, account statements and refund calculations.

Available funds are distributed to creditors according to the priorities established by insolvency law. Filing a Proof of Claim does not guarantee full repayment.

For education businesses, an additional step is critical. The provincial education regulator may separately activate student protection mechanisms. Students should therefore not wait for the bankruptcy distribution before investigating provincial tuition protection.

When a private education institution closes

The provincial protection discussed here mainly applies to regulated private career training. It should not be assumed to cover every college, university, language program, or other education provider.

In Ontario, career colleges offering vocational programs must be registered under the Ontario Career Colleges Act, 2005, and programs must be approved by the Superintendent of Career Colleges. Students enrolled at an unregistered institution or in an unapproved program may not receive the same statutory protection. The responsible regulator is under the Ministry of Colleges, Universities, Research Excellence and Security.

In British Columbia, the Private Training Institutions Regulatory Unit, or PTIRU, administers the Private Training Act. For a closure claim against the Student Tuition Protection Fund, the student generally needs to have been enrolled in an approved program when the institution ceased to hold its certificate.

From a practical perspective, students should not wait for a bankruptcy court proceeding before investigating provincial protection. The date of regulatory closure or certificate cancellation may start an important claim deadline.

Ontario: financial security, TCAF and student refunds

Ontario’s Ontario Career Colleges Act, 2005 establishes the Training Completion Assurance Fund, commonly called TCAF. Section 3 states that its purpose is to give affected students an opportunity to complete their vocational program elsewhere or receive a refund for the part of the program for which instruction or other benefit was not received.

Career colleges are required to provide prescribed financial security and pay premiums into TCAF. When a regulated career college closes, its financial security can be used first for training completion and student claims. TCAF can cover outstanding eligible claims after the available security is exhausted.

Ontario Regulation 414/06, section 38, provides the central protection. It states that the Superintendent “shall ensure that training completion or refunds are provided” where the career college has ceased operating and discontinued a vocational program before affected students completed it.

An affected student should generally confirm:

• the career college was properly registered
• the vocational program was approved
• the student had not completed the program when operations stopped
• tuition and other claimed fees can be proven with receipts or financial records
• the student submits the required claim within the applicable deadline

Where training completion is arranged, affected students are normally given 14 days to accept the opportunity. A student who refuses available training completion may generally claim the unearned portion of fees. A full refund may be available where participating in the replacement training would cause undue hardship. If no training completion is available, the regulation allows a claim for the fees paid for the discontinued vocational program.

Section 46 of Ontario Regulation 414/06 requires refund claims to be submitted no later than 6 months after the Superintendent declares the college’s security forfeited. Ontario’s student guidance similarly instructs affected students to file within the applicable 6-month claim period. Refund processing can take approximately 6 to 24 months because the Superintendent must review claims and supporting evidence.

From a practical perspective, the biggest mistake is treating the financial security as a personal bond account that each student can directly collect from. The claim is administered through the provincial regulatory process.

British Columbia: Student Tuition Protection Fund and closure claims

British Columbia uses the Private Training Act and the Student Tuition Protection Fund. The legal trigger differs from Ontario.

Section 23 of the Private Training Act allows a student to claim where an institution that was certified “ceased to hold any certificate before the student completed an approved program.” The closure claim must generally be filed no later than 1 year after the institution ceased to hold its certificate.

Students should normally preserve:

• the student enrolment contract
• proof of tuition payments
• program and enrolment records
• communications concerning the closure
• records of government student assistance, where applicable
• any additional evidence requested by PTIRU or the Trustee

BC’s Private Training Institutions Regulatory Unit states that if a school ceases to hold a certificate before the student completes the program, the student may file a tuition refund claim. PTIRU may first identify a comparable program at another institution. If no comparable program is available, or accepted special circumstances prevent the student from attending, the student may use the Special Circumstances Tuition Refund Claim Form. Other student forms are available through the BC PTIRU Forms and Resources Library.

British Columbia can also require an institution to provide financial security. Under the Fees and Student Tuition Protection Fund Regulation, acceptable security includes an irrevocable letter of credit, a qualifying surety bond or qualifying cash security. The current maximum amount of security the registrar may require is $1,000,000.

The important distinction is that students generally pursue their claim through the Student Tuition Protection Fund and PTIRU processrather than independently demanding payment from the bank or insurance company that issued the institution’s security.

Students should also expect the process to take time. BC does not publish a standard two-year processing period. Depending on the closure, supporting documents and number of affected students, adjudication may take several months. Students should therefore submit complete documentation as early as possible and should not confuse the 1-year filing deadline with the actual processing time.

Current difficulties may be more serious for international students because a school closure can create separate issues involving tuition recovery, study permits, transfers to another institution and future immigration eligibility. Financial recovery and immigration status should therefore be reviewed separately and promptly. Where immigration consequences arise, assistance can include reviewing available options, preparing supporting evidence, advising on next steps and representation of immigration applications by an immigration consultant.

Overall, bankruptcy does not itself guarantee a tuition refund. Students should determine whether the institution has formally entered bankruptcy, whether it remains registered or certified, whether the program was approved, and which provincial student protection mechanism applies. Where formal bankruptcy has occurred, filing a federal Proof of Claim may preserve the student’s position as a creditor, while the Ontario or British Columbia provincial process may provide a separate route to training completion or eligible tuition recovery.

What should international students do after their school closes?

International students should deal with their immigration status and tuition refund at the same time. Waiting for a refund before finding another school could create problems with study permit conditions.

Find a new school and protect your study status

• Find a new eligible school as soon as possible. Before paying a deposit, check the institution on IRCC’s Designated Learning Institution list. Students planning to apply for a post-graduation work permit should also confirm that the specific program is PGWP-eligible, because not every program offered by a DLI qualifies.
• Get a new Letter of Acceptance and check transfer credits. Students should ask the new school whether previous studies can be recognized and obtain transcripts, attendance records, course outlines and other academic documents from the closed school where possible.
• Apply for a new study permit when changing post-secondary schools. Under the current IRCC rules for changing schools, a student changing to another post-secondary DLI generally needs to apply to extend the current study permit and obtain a new study permit for the new institution. A new PAL or TAL may also be required, unless an exemption applies.

Students affected by a school closure may, in certain circumstances, be able to start studying at the new DLI before IRCC approves the new study permit application. This can apply where the previous school closed, discontinued the program, was suspended or lost DLI status, provided the student meets IRCC’s other requirements. IRCC also provides a 60-day processing stream for certain eligible students changing DLIs.

Check work rights, permit expiry and future PGWP eligibility

• Do not assume you can continue working during a study gap. IRCC may recognize permanent school closure as an authorized leave of up to 150 days. However, students generally cannot work on or off campus during an authorized leave.
• Check the study permit expiry date immediately. If the permit will expire soon, the student should apply before expiry. If it has already expired, the student may need to apply for restoration of status, generally within 90 days if eligible.
• Protect future PGWP eligibility. Before transferring, students should review the current PGWP requirements, including the new institution, specific program, study duration, language requirements and any applicable field-of-study requirements. Documents explaining the school closure and any interruption in studies should be retained.

Students should also continue the applicable Ontario TCAF or BC Student Tuition Protection Fund claim separately. Accepting replacement training arranged through the provincial regulator may affect the amount of refund available, so students should understand the refund consequences before committing to another program.

A school closure can therefore create three separate issues at the same time: recovering tuition, maintaining legal status in Canada and protecting future PGWP or immigration eligibility. Reviewing all three before choosing a replacement program can help prevent an immediate school problem from becoming a longer-term immigration problem.