Consumer Proposal

The Bankruptcy and Insolvency Act allows for insolvent debtors to offer a Division 2 or consumer proposal to their creditors. To qualify for a consumer proposal, your debts, excluding house mortgages, cannot exceed $75,000. If debts exceed $75,000 then a Division 1 Proposal is applicable.

Consumer proposals are generally either a lump sum proposal to settle the debts or periodic payments over a period of time. The consumer proposal must be completed within five years of the filing of the proposal.

A consumer proposal is formulated with a Trustee or Administrator who files it with the Official Receiver and sends it to your creditors for their approval.

If 25% of the dollar value of your creditors request a creditors meeting within 45 days of filing the proposal, a meeting is called and the creditors vote on the acceptance of the proposal. If the majority of the creditors in dollar value accept the proposal, it is approved.
The court may also be asked to approve the proposal.

When the proposal is approved and you meet its terms, you are then released from any remaining debt except debts under Section 178 of the Bankruptcy and Insolvency Act unless that creditor agrees. (These are listed in the FAQ section.)

If your creditors do not accept the Consumer Proposal or if you default in its terms, you are not protected by the Bankruptcy and Insolvency Act. Creditors may proceed with legal action against you as you are not automatically bankrupt.

There is a fee for filing a consumer proposal which is prescribed in The Bankruptcy and Insolvency Act.

More Solutions

Direct Negotiation with creditors | Debt Consolidation | Division 1 Proposals | Personal Bankruptcy