What is a Proposal?
A proposal under the Bankruptcy and Insolvency Act is similar to a Debt
Management Plan (“DMP”) in that you can afford to repay a portion
or all of your debts but you simply need more time to pay. Unlike a DMP,
a proposal to your creditors will allow you to compromise your debt (ie:
make a settlement for less than the total amount you owe), has no interest
and is legally binding on all of your unsecured creditors if the majority
of them accept your proposal.
If your total debts (excluding the mortgage on your principle residence) are $75,000 or less, you will file a consumer proposal which is a streamlined administrative process. The advantages to a consumer proposal are:
- maximum of five years to pay
- if accepted by a majority (each unsecured creditor gets one vote for each dollar owing to them), it is deemed to be accepted by ALL of your unsecured creditors and they are all legally bound by it
- there is no interest
- you may repay only a portion of the total debt you owe
- your creditors are stayed or restricted from taking any legal action against you
- wage garnishments – except those for support and alimony – are immediately stopped
If your total debts (excluding the mortgage on your principle residence) exceed $75,000, then you will file a Division I proposal which is a creditor/court driven process. There are similar advantages as noted above however, time frames to pay and voting/acceptance rules are different. The Trustee will provide information specific to your situation and explain the differences.
Proposals to creditors were created to provide individuals and businesses with an alternative to bankruptcy. If you are in financial trouble and have the ability to repay a portion of your debt, a proposal may be the right solution for you.
More information about proposals can be found on the website for the Superintendent of Bankruptcy.