Understanding Division I Proposal for Debt Management

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A Division I Proposal is a formal debt settlement option in Canada for those with unsecured debts over $250,000. It allows you to repay a portion of your debt over time while keeping your assets. A licensed insolvency trustee negotiates better terms than bankruptcy, helping manage high debt responsibly.

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Question

What is a Division I Proposal? I need to understand what a Division I Proposal is and how it differs from other debt management options.

From: Anonymous, Nova Scotia (NS)

Answer

A Division I Proposal is a formal debt settlement option in Canada under the Bankruptcy and Insolvency Act. It’s designed for individuals or businesses with unsecured debts over $250,000. This proposal lets you repay a portion of your debt over time while keeping your assets. A licensed insolvency trustee oversees the process, negotiating more favorable terms than bankruptcy usually offers. It prevents creditor actions and sets up a structured repayment plan, which can be a lifesaver if you’re facing serious financial challenges.

Compared to consumer proposals, which are capped at $250,000, Division I Proposals offer flexibility in both debt amounts and repayment terms. It’s a great option for those with high debt who want to avoid bankruptcy while managing their liabilities responsibly. Creditors must accept the proposal, ensuring that a fair balance is struck between your needs and theirs. This option helps you reorganize your debt effectively, offering significant relief and a clear path forward.

From: Insider Scott

OSB Based Answer

A Division I Proposal is a formal debt restructuring process available to individuals or corporations under the Bankruptcy and Insolvency Act in Canada. It allows a debtor to propose a payment plan to creditors to settle debts over a specified period. Division I Proposals are typically more complex and can deal with larger amounts of debt compared to Division II Proposals, which cater to consumers with lesser debt loads.

Key distinctions include:

• Division I Proposals involve a licensed insolvency trustee and can include negotiations for reduced debt payments or extended timelines, while Division II Proposals are simpler and often used by individuals with total debts of less than $250,000.
• Division I Proposals require the approval of 75% of voting creditors, whereas Division II Proposals require a simple majority.

For more specifics, refer to the Bankruptcy and Insolvency Act, particularly sections regarding Proposals (Section 66.1) and eligibility requirements. For additional guidance, consult the associated regulations in C.R.C., c. 368 and SOR/2007-256.

From: This answer is provided by scanning the OSB Bankruptcy & Insolvency Act and related directives

References

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