Ordinary (Division 1) Proposal
An Ordinary Proposal (or Division 1 proposal) is similar to a Consumer Proposal but applies to individuals or businesses with more complex situations involving debts, not including mortgages on a principle residence, of over $250,000. It is a legally binding process governed by the Bankruptcy and Insolvency Act (BIA) administered by a Licensed Insolvency Trustee (LIT).
Numerous provisions in the BIA may impact a proposal filing and the risks associated with filing a proposal. We advise you to contact one of our Licensed Insolvency Trustees to discuss your options and select the best solution for your financial future.
How an Ordinary Proposal Works
Below are the steps when filing an ordinary proposal:
1. Seek the assistance of a LIT
Work with our team of trusted advisors to conduct a formal assessment of your financial situation to determine what options are available to you. If filing a Division 1 Proposal is your best option, we will work with you to develop a plan to present to your creditors.
2. Filing a “Notice of Intention to File a Proposal”
We will file a “Notice of Intention to File a Proposal,” notifying all your creditors that the proposal is being prepared for presentation. During this time, which can range from 30 days to six months, creditors cannot continue or commence any legal proceeding against you without leave of court. In addition, generally, no payments are made to the outstanding unsecured creditors during this time.
There may be exceptions to this process, so it is crucial to speak with us before deciding to file a Division 1 proposal.
3. Obtaining Approval
Once developed, the proposal is presented to your creditors for approval. It must be approved by the majority of your creditors, holding at least two-thirds in value of the claims. Once this majority has accepted the proposal, it needs to be approved by the court. A proposal accepted by the creditors and approved by the court is binding on all unsecured creditors and secured creditors.
You will remain in possession of your property as long as you continue to make payments to your secured creditors who hold charges against you and abide by the terms of the proposal.
4. Fulfilling the Proposal
Once you have fulfilled the terms of your proposal, you will be issued a Certificate of Full Performance and legally released from the debts included in your proposal.
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