There are several strategies you can consider when dealing with problem debt. Two of the most popular proposals are Consumer Proposals and division 1 proposals. Below is a comparison chart between the two to breakdown how they could work for you.
Consumer Proposal | Division 1 Proposal |
|---|---|
| Debts must be less than $250,000 | Debts must be more than $250,000 |
| Only individuals can file a Consumer Proposal | Individuals, a bankrupt, or a trustee of the estate of a deceased bankrupt can file a Division 1 proposal |
| Not Applicable | The Trustee must include a projected cash flow statement of the insolvent with this Proposal |
| Creditors have 45 days to vote for or against the proposal. | A mandatory Meeting of Creditors must be held within 21 days of filing the proposal. The creditors will then vote for or against at this meeting. |
| If the Proposal is rejected, the debtor may opt to file a Bankruptcy or attempt to settle with the creditors directly in an informal manner. | If the Proposal is rejected at the Meeting of Creditors, the debtor is automatically bankrupt. |
| 2 mandatory counselling sessions must be attended during the Consumer Proposal (the first within 60 days, the second within 210 days) | counselling sessions not required in a Division 1 Proposal |
| Proposal can be 1-5 years. Paying down the proposal earlier is recommended and welcomed. | A Division 1 Proposal is normally a five-year process but the length can differ. Paying down the proposal earlier is recommended and welcomed. |
| If three payments are missed then the Consumer Proposal is considered “annulled” , the protection is immediately lifted and the creditors have the legal right to pursue the amounts owing to them. | In a Division 1 Proposal, if in default the protection is lifted and creditors have the legal right to pursue amounts owing to them. |