In order to obtain a fresh financial start without filing for bankruptcy, you may wish to consider filing a proposal which allows you to settle your debt, freeze interest payments and obtain a stay of proceedings against your creditors. A stay of proceedings means that, with some exceptions, your creditors cannot take any further action against you, including wage garnishments and other legal action.
There are two types of proposals legislated by the Bankruptcy and Insolvency Act: A Division I Proposal and a Division II Consumer Proposal.
A Division I Proposal is available to any consumer or corporation who is facing financial difficulties and has the cash flow to settle their debt rather than going into bankruptcy. This type of proposal is used most frequently by businesses or individuals who have a larger debt load. Once the proposal has been prepared and filed, a creditor’s meeting is held within 21 days of filing where the vote takes place. Once approved, the proposal is approved by the court and is then legally binding on all parties.
A Division II Consumer Proposal is the most commonly used proposal. Consumer proposals are available only to individuals who owe less than $250,000, excluding any debts secured by your principal residence. For those consumers who have debt exceeding these thresholds, a Division I Proposal can be filed. Once the consumer proposal has been prepared and filed, the creditors have 45 days to receive, review and vote on the consumer proposal. In a consumer proposal, the majority rules; if the majority (by dollar value) of your creditors vote in favour of your consumer proposal, it is then approved. Around 15 days later, it is deemed approved by the court and is legally binding on all parties.
To download our helpful consumer proposal information sheet click here.
Licensed Insolvency Trustees are the only professionals that can file a Division I Proposal and a Division II Consumer Proposal on your behalf. We encourage you to contact a Licensed Insolvency Trustee to discuss this option, and determine if one of these options is right for you.