Proposals – Division One & Division Two

Tom Locke - Insolvency Trustee in London, Ontario
November 15, 2021

The Bankruptcy & Insolvency Act allows for the making of two different levels of proposal.  The first, Division One, allows incorporated companies as well as individuals to make an offering to their creditors, regardless of how much debt they owe. 

A Division Two proposal is only for consumers who have debts, excluding the mortgage on a principal residence, that do not exceed $250,000.

There are a number of administrative differences that mostly impact on how the Licensed Insolvency Trustee (“LIT”) is going manage the proposal.  Probably the most glaring difference, that debtors must be aware of, is that if the creditors reject a Division One proposal the debtor(s) automatically becomes bankrupt.  If creditors reject a Division Two proposal, the debtor(s) will make that decision for themselves.

A proposal, according to the Miriam Webster dictionary is: “an act of putting forward or stating something for consideration”.  Proposals are not precise formulas, even though at times some parties involved treat them as if they were. They are basically a “settlement offer” made to the crdeitors as an alternative to making regular payments.

Proposals allow debtors to present one of a variety of possible solutions to their creditors including the ability to renegotiate the terms of that very proposal at some point between acceptance of the original terms and completion of the proposal.

Proposals can be great options for people who need to get their debts under control and avoid the costs and consequences of legal actions.  To find out if a proposal is right for you and your family, call us 519-646-2222