Comparison of Consumer Proposals with Division I Proposals
A 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.
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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.