You Owe Money —
Division I Proposals
A Division I proposal is a formal procedure governed by the Bankruptcy and Insolvency Act and is available to businesses and individuals — there is no limit with respect to how much money is owed.
Find a Licensed Insolvency Trustee
If you are considering bankruptcy, your first step should be to meet with a Licensed Insolvency Trustee (LIT). LITs are individuals licensed by the Office of the Superintendent of Bankruptcy (OSB) to administer the bankruptcy process. The LIT will evaluate your financial situation and discuss various alternatives that could help you to solve your financial problems.
What happens when you file a Division I proposal?
The LIT will file the proposal, or the notice of intention to file a proposal, with the Office of the Superintendent of Bankruptcy. Once you submit the notice of intention to file a proposal, or your proposal, you will stop making any payments directly to your unsecured creditors, any salary garnishments will stop and lawsuits against you by creditors will be stayed (stopped). Secured creditors have the option of being part of a Division I proposal.
Within five days of filing, a copy of the notice of intention is sent to all known creditors (including a report on the affairs of the debtor). The proposal itself must then be filed within 30 days after the notice of intention, unless the Court has granted an extension.
- disclose all of his or her assets (property) and liabilities (debts) to the LIT;
- attend the first meeting of creditors;
- attend two counselling sessions;
- advise the LIT in writing of any address changes; and
- generally assist the LIT in administering the proposal.
- The LIT will set up a meeting of creditors where creditors will vote to accept or reject the proposal. At the meeting of creditors, the LIT must also present the creditors with an estimate of what the creditors would realize under a bankruptcy compared with the amount they are being offered under the proposal.
- If at least 66.6 percent (two thirds) in dollars and 50 percent plus one in number of eligible creditors who vote approve the proposal, the proposal is accepted by the creditors. The proposal must then be approved by the Court.
- If the proposal is accepted by the creditors and approved by the Court, all unsecured creditors are bound by the proposal.
- If the proposal does not receive the required votes, you are immediately declared bankrupt as of the date of the meeting of creditors.
- If your Division I proposal is accepted,
- you will be responsible for paying either a lump sum or periodic payments to the LIT and adhering to any other conditions in the proposal; and
- you retain your assets so long as you make your payments to your secured creditors.
- If you meet the conditions in the proposal in full, you will be legally released from the debts included in the proposal. If the terms of the proposal are not honoured, then the LIT or a creditor may apply to the Court for the proposal to be annulled and you'll be placed into bankruptcy.
Responsibilities of the debtor
Enquiries or complaints
If you have questions about the process for Division I proposals, contact us.
If you feel that the process was poorly managed or believe you have suffered a prejudice, please contact us. The OSB keeps records of all complaints and can investigate any complaint from a debtor or other person.
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