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INFORMAL, CONSUMER PROPOSAL & DIVISION 1 PROPOSAL

What is an Informal Proposal?

An Informal Proposal is the only type of Proposal that you do not need to work with a Licensed Insolvency Trustee for. You make a written offer to your creditors to pay some amount less than the full value of the debt. This type of creditor proposal usually does not work because there is no Stay of Proceedings that stops the creditors from taking collection action, legal action or garnishment of wages.

What is a Consumer Proposal?

A consumer proposal a legal proceeding administered under and governed by, The Bankruptcy and Insolvency Act (BIA) which is a highly effective tool that only Licensed Insolvency Trustees use as an alternative to bankruptcy. The Trustee will negotiate a reduction of your debt and a debt repayment plan that the bankruptcy Court, your creditors and you agree to. To qualify to file a consumer proposal you must meet the following:

Your debts must be between $1,000 and $250,000, not including mortgages on principal residence;
You must be insolvent i.e. your debts exceed your asset values; and
You must be an individual that resides in or carries on business in Canada.

What is a Division 1 Proposal?

A Division 1 Proposal a legal proceeding administered under and governed by, The Bankruptcy and Insolvency Act (BIA) which is a highly effective tool that only Licensed Insolvency Trustees use as an alternative to bankruptcy. This proposal can be filed by an individual or a corporation. This is not a recommended course of action for an individual if they qualify to use a consumer proposal. Under this option, if you default on your proposal terms or, if the creditors vote against the proposal, you are automatically deemed bankrupt. To qualify to file a Division 1 proposal you must meet the following:

Your debts must exceed $250,000;
You must be insolvent i.e. your debts exceed your asset values; and
You must be an individual or a corporation that resides in or carries on business in Canada.

THE ULTIMATE GOAL – DISCHARGE

Upon all of your required payments being made, a Certificate of Full Performance will be issued and you or your corporation will be discharged.

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