Division I Proposal: A Structured Solution for Significant Debt
If you are facing significant debt, creditor pressure, or financial uncertainty, a Division I proposal may provide a structured path forward. Under the Bankruptcy and Insolvency Act (BIA), individuals and businesses with complex financial situations can negotiate repayment terms with creditors while exploring an alternative to bankruptcy.
At Campbell Saunders Ltd., our licensed insolvency trustees provide confidential guidance throughout the process. We take the time to understand your financial circumstances, explain your options, and help you determine whether a Division I Proposal is the right solution for you.
What Is a Division I Proposal?
A Division I proposal is a formal debt restructuring process available under the Bankruptcy and Insolvency Act that allows individuals and businesses with significant debt to present a repayment proposal to their creditors.Unlike a Consumer Proposal, which has a maximum debt limit, a Division I Proposal does not have an upper debt limit. This makes it an option for individuals with significant debt or businesses facing complex financial challenges.The process must be administered by a Licensed Insolvency Trustee. Your Trustee reviews your financial situation, helps prepare the proposal, communicates with creditors, and guides you through each stage of the process.
Who Is a Division I Proposal For?
A Division I proposal may be suitable for individuals or businesses dealing with significant debt and looking for a formal restructuring option.
You may want to consider a Division I Proposal if you:
- Have debts exceeding $250,000 (excluding a mortgage secured by your principal residence)
- Are facing creditor pressure, collection activity, lawsuits, or wage garnishments
- Have a complex financial situation requiring a customized approach
- Want to explore alternatives to bankruptcy
- Need a structured repayment plan based on your financial circumstances
For businesses, a Division I Proposal may provide an opportunity to restructure debt while continuing operations. Our insolvency trustees can review your circumstances and help determine whether this solution is right for you.
Division I Proposal vs. Consumer Proposal
Both a Division I Proposal and a Consumer Proposal are legal debt restructuring options available under the Bankruptcy and Insolvency Act. However, they are designed for different situations.
Division I Proposal
No maximum debt limit
Available to individuals and businesses
Often used for more complex financial situations
Requires a meeting of creditors
If rejected by creditors, bankruptcy may occur
Consumer Proposal
Available to individuals with debts up to the applicable limit
Designed for individuals only
Generally a simpler process
A creditor meeting is only required in certain situations
Rejection does not automatically result in bankruptcy
Benefits of a Division I Proposal
Protection From Creditor Action
Filing a Division I Proposal triggers a stay of proceedings that stops many actions by unsecured creditors, including collection calls, lawsuits, and wage garnishments.
Certain secured creditors may have different rights depending on your circumstances.
Opportunity to Avoid Bankruptcy
If accepted and successfully completed, a Division I Proposal may allow you to restructure your debts without proceeding through bankruptcy.
Create a Structured Repayment Plan
Instead of managing multiple creditor demands, a Division I Proposal creates a formal repayment plan based on your financial circumstances.
Potentially Retain Assets
A Division I Proposal does not automatically require you to give up your assets. Depending on your circumstances and ability to meet your obligations, you may be able to retain assets while completing your repayment plan.
Receive Professional Guidance
Our licensed insolvency trustees provide experienced guidance to help you understand your options and make informed decisions.
How the Division I Proposal Process Works
We begin by reviewing your debts, assets, income and available options.
Step 1: Confidential Consultation With an Insolvency Trustee
The process begins with a review of your financial situation, including your debts, assets, income, and available options.
During your consultation, we will:
- Listen to your circumstances
- Explain available debt solutions
- Answer your questions
- Help determine whether a Division I Proposal is appropriate
Step 2: Preparing Your Proposal
If appropriate, your License Insolvency Trustee prepares a proposal outlining repayment terms for your creditors.
Step 3: Filing the Proposal or Notice of Intention
Once filed, a stay of proceedings may provide protection from many unsecured creditor actions while the proposal process moves forward.
Step 4: Creditor Review and Voting
Creditors review the proposal and vote on whether to accept the repayment terms.
For a proposal to be accepted, creditors representing two thirds of the dollar value, and the majority by number, must vote in favour.
If accepted by creditors, the proposal must also receive court approval.
Step 5: Completing Your Proposal
Once approved, you make payments according to the agreed terms.
After successfully completing the proposal, you will be legally released from the debts included in the proposal.
Your Responsibilities During a Division I Proposal
During the Division I proposal you will be responsible for:
- Providing complete and accurate information about your financial situation
- Disclosing your assets and liabilities
- Attending required meetings of creditors
- Making payments according to the terms of your proposal
- Advising your Licensed Insolvency Trustee of changes to your circumstances
Your insolvency trustee will help you understand what is expected and support you throughout the process.
Our consultations are free, and there’s no obligation to proceed if you decide that a consumer proposal isn’t the right path for you to take.
Contact us to get more information – you can’t make an informed decision if you haven’t explored all your options!
Division I Proposal for Individuals and Businesses
Division I Proposal for Individuals
Individuals with debts exceeding the Consumer Proposal limit may benefit from a Division I Proposal.
It may provide an opportunity to restructure debt, create manageable payments, and explore alternatives to bankruptcy.
Division I Proposal for Businesses
For businesses facing financial pressure, a Division I Proposal may provide an opportunity to restructure debt while continuing operations.
It can provide a structured repayment plan while helping preserve business operations.
Experienced insolvency trustees can help business owners understand their options and determine the best approach for their circumstances.
Common Division I Proposal Scenario
A Division I proposal may be considered when an individual or business has significant debt but wants to explore alternatives to bankruptcy.
For example, a business owner may have accumulated substantial debt due to changing market conditions, unpaid supplier obligations, or tax-related challenges. Although the business remains viable, creditor demands make it difficult to manage ongoing obligations.
By working with a Licensed Insolvency Trustee, the business owner may be able to develop a Division I Proposal that restructures debt and creates a clearer path forward.
Considerations Before Filing a Division I Proposal
Before filing, it’s important to understand that:
- Creditors must approve the proposal before it can proceed
- If creditors reject the proposal, bankruptcy may occur
- Payments must be completed according to the proposal terms
- Failure to meet proposal conditions may result in the proposal being annulled
A Licensed Insolvency Trustee can explain the benefits, responsibilities, and potential risks before you decide whether this option is right for you.
Frequently Asked Questions
Contact Campbell Saunders Ltd. today to schedule your confidential consultation.