Bankruptcy - Personal Services

Consumer Proposals

Consumer proposals and Division 1 proposals are alternatives to bankruptcy. Although similar in many respects, there are some major differences. Consumer proposals are available to individuals only whose total debts do not exceed $250,000, not including debts secured by their principal residence while Division 1 proposals are available to both businesses and individuals whose debts exceed $250,000 (excluding the mortgage on their principal residence).

What are consumer proposals?


Consumer proposals are formal procedures governed by the Bankruptcy and Insolvency Act (BIA) available only to individuals. Working with a trustee in bankruptcy you make a proposal to:

  • Pay your creditors a percentage of what you owe them over a specific period of time
  • Extend the time you have to pay off the debt
  • Or a combination of both

Payments are made through the trustee, and the trustee uses that money to pay each of your creditors. The debt must be paid off within five years.

What are the advantages of a consumer proposal?

The advantages of a consumer proposal are:

  • You keep all of your assets
  • Actions against you by unsecured creditors, such as wage garnishments will be stopped
  • Unlike informal debt settlement, the consumer proposal is a forum where all of your creditors must deal with your restructuring
  • You don't have to declare bankruptcy

Who qualifies for a consumer proposal?

A consumer proposal is available to individuals whose total debts do not exceed $250,000, not including debts secured by their principal residence.

What is a Division 1 proposal?

A Division I proposal is a formal procedure governed by the Bankruptcy and Insolvency Act (BIA) and is available to businesses and individuals whose debts exceed $250,000 (excluding the mortgage on your principal residence). Working with a trustee in bankruptcy you make a proposal to:

  • Pay your creditors a percentage of what you owe them over a specific period of time
  • Extend the time you have to pay off the debt
  • Or a combination of both

Payments are made through the trustee, and the trustee uses that money to pay each of your creditors. The debt must be paid off within five years.

What are the advantages of a Division 1 proposal?

The advantages of a Division 1 proposal are:

  • You keep all of your assets
  • Actions against you by unsecured creditors, such as wage garnishments will be stopped
  • Unlike informal debt settlement, the consumer proposal is a forum where all of your creditors must deal with your restructuring
  • If your Division I Proposal is successful, you won't have to or be deemed to have declared bankruptcy

Contact Ira Smith Trustee & Receiver Inc. today for a consultation to determine if a consumer proposal or Division 1 proposal is the right bankruptcy alternative for you to be Starting Over, Starting now