Division 1 Proposal versus Consumer Proposal in the Edmonton region
The Bankruptcy and Insolvency Act provides two different types of proposals to provide debt help in Canada: the Division 1 Proposal and the Consumer Proposal. These proposals are available for different types of debt situations.
Filing a Consumer Proposal (Division II Proposal) in our Edmonton office
Consumer Proposals are for individual debtors with debt less than $250,000 (not including the mortgage on their home). In a Consumer Proposal, a Licensed Insolvency Trustee will analyze the value of your assets, the amount of your debt owed and the amount of your net household income. Using this information, the Trustee will find a payment amount upon which your creditors will likely accept. This amount is usually a percentage of what you owe and is payable over a specific period of time.
Once filed, from our Edmonton office, protection will be in place so that creditors will stop actions against you. The unsecured creditors are given 45 days to vote for or against the proposal or put forward a counter-offer. Generally, if the Consumer Proposal is approved by the majority of creditors, the proposal is deemed approved by the courts 15 days later.
During your Consumer Proposal period you will have to attend two mandatory counselling sessions. Finishing the proposal can take 1-5 years, but paying it down early is always recommended.
If three payments are missed, your proposal is considered annulled and the protection against your creditors is lost. They will then have the legal right to pursue the amounts you owe them. If the proposal is rejected, you can opt to file for bankruptcy or you can try to settle with your creditors directly.
Filing a Division 1 Proposal (Commercial Proposal)
Division 1 Proposals are for individuals or corporations with debt over $250,000. As with the Consumer Proposal, our Licensed Insolvency Trustees (formally known as Trustees in Bankruptcy) will go over your assets and debt to determine a percentage to pay your creditors. Once filed, protection is in place immediately against your creditors.
Your Trustee will then file a statement indicating your projected cash flow, and he or she will set up a mandatory meeting of creditors within 21 days of the filing. At this meeting, your Trustee will present a report on your affairs and your creditors will vote on the proposal. When accepted, Division 1 Proposals can take up to five years to pay, but we recommend paying down the proposal early.
If you default on any part of the proposal, your protection is lifted and your creditors have the legal right to pursue the money you owe them. If the proposal is rejected, you will automatically become bankrupt.
Reducing Debt in Edmonton and Surrounding Regions
For either proposal, your Trustee will present the creditors with an estimate of what they would realize on a proposal versus a bankruptcy, and the settlement offered must be greater than what they would receive if you went bankrupt. The best part of these proposals is that you may avoid bankruptcy while retaining all of your assets. To learn more about getting debt help from our Edmonton office, call us at 780-424-9944 or toll-free at 1-800-463-3328.
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