Comparison of Consumer Proposals with Division I Proposals

Comparison of Consumer Proposals with Division I ProposalsA Comparison of Consumer Proposals with Division I Proposals is a useful exercise for people seeking a full presentation of all proposal options available.

Consumer Proposals are one of most commonly used ways to deal with a person’s out of control debt.

However, in some situations a Division I Proposal is more suitable. If the person’s debt, excluding a mortgage on a principal residence, is more than $250,000 then a consumer proposal is not available; but a Division I Proposal is.

Other reasons why a Division I Proposal may be more desirable are:

  • The time to wait for credit acceptance is quicker in a Division I Proposal; approximately 21 days compared to 45 or more days for a consumer proposal;
  • If the Division I Proposal is not accepted the debtor is automatically bankrupt on the date of the creditors’ meeting.  Therefore, the filing of a Division Proposals deals with the debt with one filing and the creditors’ know that the debtor is serious about having a solution to his debt problem and will be more inclined to accept the proposal rather than try to negotiate a better deal.

The following is a Comparison of Consumer Proposals with Division I Proposals:

Key Considerations. Consumer Proposals. Division I Proposals.
Who proposal is available to Debtors owing only consumer debt amounting to less than $250,000, excluding a mortgage on the principal residence. Debtors who have personal or business debt. There is no dollar limit on the amount of debt.
Stay of proceedings Proposal stays all legal actions undertaken or contemplated by unsecured creditors. Proposal stays all legal actions undertaken or contemplated by unsecured creditors.
Term Cannot be for a term of more than five years. Can be for any term that makes economic sense.
No. of counselling sessions required Two None
Period for acceptance of proposal by creditors Deemed to be accepted after 45 days if creditors do not dissent or call for a creditors’ meeting. Creditors vote at a creditors’ held in 21 days.
Period for court approval of proposal (after acceptance by creditors) Deemed to be approved after 15 days following creditor acceptance if there is no request to take the proposal to court for approval. The trustee applies for court approval expeditiously, usually within three weeks.
Creditors’ meeting Held if requested within 45 days of the filing. Held approximately three weeks after the proposal is filed.
How proposal is accepted or rejected It is either deemed to be accepted after 45 days (see above) or if creditors ask for a meeting, it is accepted by a simple majority of the dollars voted. At least 66.67 percent (2/3) in dollars and 50% plus one in number of eligible creditors who vote must approve.
What happens if proposal is not accepted or approved? Debtor cannot make another consumer proposal. Note that the debtor is not automatically bankrupt if the consumer proposal is not accepted. Stay of proceedings is lifted. Debtor is immediately bankrupt effective on the date of the creditors meeting.

 

Consumer Proposal vs Division I Proposal Infographic

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