Division 1 Proposals

A Division I Proposal is a formal procedure governed by the Bankruptcy and Insolvency Act of Canada. Insolvent corporations and/or individuals owing more than $250,000 (not including the mortgage on their principle residence) who want to file a proposal rather than a bankruptcy are able to file a Division I Proposal.

The Act requires that the debtor work with a licensed Trustee in Bankruptcy, like Keith G. Collins Ltd., to oversee this process.

What is a Division I Proposal?

A Division I Proposal allows you, along with your Trustee in Bankruptcy, to put together an offer to pay your creditors a portion or all of your outstanding debt over a specified period of time. It is necessary for a majority of your creditors representing no less than two-thirds of your debt to agree to the terms of the proposal.

If approved, you make the specified payments to your Trustee who in turn pays each of your creditors. Upon meeting the obligations outlined in your proposal, you will be legally released from your debts.

What are the advantages of a Division I Proposal?

There are a number of advantages afforded to those that file a Division I Proposal. For example, unsecured creditors must halt collection and court actions as soon as a Division I Proposal is filed. Additionally, there is no prescribed limit as to the time period over which payments may be made, as opposed to a Consumer Proposal where the time limit is five years or less.

Most importantly, if the Division I Proposal is successful, the debtor retains their assets and avoids bankruptcy.

Who is eligible for a Division I Proposal?

Insolvent corporations and individuals owing more than $250,000 (not including the mortgage on their principle residence) who want to file a proposal rather than a bankruptcy are able to file a Division I Proposal. Many businesses and self-employed professionals use this type of proposal as opposed to a Consumer Proposal.

Are there are any significant risks to a Division I Proposal?

The most significant risk associated with Division I Proposal is the possibility that the debtor will be placed into bankruptcy. This can occur in two ways.

First, it occurs if the required majority of unsecured creditors do not accept the proposal as filed or as amended or if the proposal is not approved by the court.
Secondly, it may occur if the obligations set forth in the proposal are not completed as set out. It is therefore important to work with an experienced Trustee in Bankruptcy to ensure the highest probability that the proposal will succeed.

For more information on Division I Proposals and any other services, or to book a free initial consultation, please contact us at (204) 944-0187 (toll free: 1-800-263-0070). If you would prefer, you can complete our First Step form.