A Division 1 Proposal offers a formal, structured way to settle debts and avoid bankruptcy. This is a specific type of proposal designed for individuals who have debts that exceed $250,000, excluding the mortgage on any principal residence.
Our Licensed Insolvency Trustees specialize in creating powerful, forward-thinking solutions like Division 1 Proposals, providing a path to financial stability. With our local expertise and personalized guidance, we help you turn financial challenges into opportunities for a brighter future.
When a Division 1 Proposal Is Used for Personal Debt
A Division 1 Proposal may be used by individuals whose unsecured debts exceed the $250,000 limit under a consumer proposal.
For individuals with higher levels of debt, this process provides a legal framework to negotiate repayment with creditors and avoid bankruptcy.
The proposal allows the debtor to present a repayment plan that reflects their financial capacity while addressing outstanding obligations.
Get more flexible payment terms such as lower monthly payments or extended repayment periods. You can also pay one lump sum to your Licensed Insolvency Trustee, who will then distribute to your creditors for you.
Once a Division 1 Proposal is accepted by the court, you are protected from further creditor actions (lawsuits, collection calls, wage garnishments, etc.).
Creditors may agree to accept a reduced amount of the total debt owed in a Division 1 Proposal. Pending your situation, this means you may only need to repay a portion of your outstanding debts.
By opting to file for a Division 1 Proposal, you can often avoid bankruptcy and begin rebuilding credit sooner.
Division 1 Proposals are designed for individuals or businesses with higher debt thresholds, which means that it can be more complicated and require more negotiation with creditors.
Division 1 Proposals must be filed with the court and require court approval. This formal legal process may involve additional legal costs and time.
While not always the case, in some situations you may need to provide collateral or security for the repayment.
The details of a Division 1 Proposal are a matter of public record and will be searchable through the court.
Imagine someone who has accumulated a high level of personal debt due to business guarantees, tax obligations, or unexpected financial setbacks. The debt has grown beyond the limits allowed under a consumer proposal, and creditors are beginning to apply pressure.
After speaking with a Licensed Insolvency Trustee, they learn that a Division 1 Proposal may allow them to restructure their debts rather than entering bankruptcy.
By negotiating a repayment plan with creditors, they gain the opportunity to resolve their obligations through a structured process that reflects their financial capacity.
If this situation sounds familiar, a Licensed Insolvency Trustee can help you understand your options.
Consumer proposals are available to individuals whose unsecured debts are below $250,000, excluding mortgages on a principal residence.
When debts exceed this threshold, a Division 1 Proposal is an attractive option.
Once a Division 1 Proposal is filed, a stay of proceedings takes effect.
This legal protection stops most creditor actions including:
Creditors are then notified of the proposal and given the opportunity to review the repayment plan.
Once the proposal is approved by the creditors and the court confirms it, the debtor follows the agreed repayment terms until the proposal is completed.
A Licensed Insolvency Trustee administers the Division 1 Proposal process.
They review the debtor’s financial situation, prepare the proposal documentation, and communicate with creditors throughout the process.
Their role is to ensure the proposal meets legal requirements while helping both parties reach a workable solution.
We can help you weigh your debt-relief options so that you can make a confident and well-informed decision.
Learn more about how Division 1 Proposals work and how they compare with other personal debt solutions.
Learn when Division 1 Proposals apply, how the approval process works, and how individuals can restructure larger debt obligations.
Understand when a Division 1 Proposal may be used instead of other personal debt solutions and how the process differs.
Individuals whose unsecured debts exceed $250,000 are eligible if they cannot realistically repay their obligations and want to avoid bankruptcy.
In many cases, assets can be retained because the proposal focuses on restructuring repayment rather than liquidation.
No. Approval requires a majority of creditor votes representing at least two thirds of the total debt value.
The repayment timeline depends on the terms negotiated with creditors and the debtor’s financial capacity.
If creditors reject the proposal, the debtor will automatically enter bankruptcy under the Bankruptcy and Insolvency Act.
Yes. Many individuals begin rebuilding credit through responsible borrowing and consistent payment history after completing their proposal.
