Consumer Proposal

A Good Bankruptcy Alternative

A consumer proposal will bring all of your creditors to the table.  The creditors have a limited window of opportunity (45 days for a Consumer Proposal) to vote on acceptance of the proposal or to renegotiate its terms.  Proposals don’t always pass but the vast majority do, and once they are in place you can get out of debt with an affordable payment.  Creditors are able to recover a portion of the debts they are owed and will write the balances off.

What exactly is a Formal Proposal

A consumer proposal is one that is filed by a Licensed Proposal Administrator, also known as a Licensed Insolvency Trustee.  This kind of proposal to creditors is supported by laws that provide consumer protection and force the creditors to discuss and, in some cases, accept a proposal offering.  Proposals are voted on by the creditors and the majority rules so if a few creditors vote against the proposal they may be forced to accept its terms by the majority of creditors who do vote in favour of it.

Creditors get one vote for each dollar of their claims.  Creditors cannot vote both ways (for and against) in the same proposal – for example a bank cannot vote in favour of a proposal on their line of credit and against on their credit card.   In order for a proposal to pass 50% or more of the creditors must vote in favour.  By default if no creditors vote within the prescribed time frame the proposal is deemed to have been approved. 

The idea behind a proposal is to allow you to make some form of repayment on newly negotiated terms, usually a percentage of the original debt, with no interest, and payable over a term of up to five years.  The administrator provides a supporting role advising on what the proposal offering should be and explaining its benefits to the debtor and the creditors.

Proposal Types

Consumer Proposal

Less than $250,000 in debt

A Consumer Proposal is simpler and easier to administer, it is for people who owe less than $250,000.00 excluding a mortgage on a principal residence.  These proposals can be filed jointly by debtors whose debts are similar.  Joint filings are usually between spouses but can also be between other related parties,

Division One Proposal

Over $250,000 in debt

Division One Proposals are a little more complicated requiring the trustee to hold meetings and attend at court for approval.  They and are used by individuals with debts that exceed $250,000.00 and by Incorporated Companies having financial problems.  Division One Proposals can also be filed jointly between (financially) related parties.

Proposals for Businesses

It is important to know there are different types of formal proposal, the most common are Division One Proposal and Division Two Proposal.  Only a Licensed Insolvency Trustee can file any type of formal proposal.  Another form of proposal is called a Companies Creditors Arrangements Act.  The CCAA is only available for companies with over five million dollars of debts.


About 80% of all insolvency filings involve a proposal.

What happens if my creditors don’t like the proposal?

If the creditors vote against the initial proposal the administrator will try to renegotiate the arrangement to find something that is acceptable for both you and your creditors.  Most reasonable proposals are accepted by creditors without renegotiation.  It is very important that the proposal offering makes sense to both sides – the debtor and the creditors.  While there is no magic formula for the amount that should be offered to creditors under a proposal, the average seems to be between 15-30% of the original value of the debt.  Proposals can be made using a variety of payment terms and conditions depending on the complexity of your situation.

Talk to us and find out if a Proposal is right for you.


Real Life Situation

We have helped many people file good proposals.  Some have had flexible payment schedules that have been based on whether the debtor was working or not.   We have helped small business owners and other tax debtors to make acceptable proposals.  Some people have been able to make lump sum proposals with one lump of money coming from a refinancing of real property or a third party helping them out.  Most proposals are based on regular monthly payments made over a period of several years.

How to Start?

Call us today for your FREE consultation.

From our first contact we try to find the right solution for you and your family, we follow through and help every step of the way to financial health and a balanced budget.