Too Much Debt for a Consumer Proposal? Here’s your next option

If you owe more than $250,000 (excluding your mortgage) and feel stuck, a consumer proposal may not be enough to solve your debt problems. Fortunately, a Division I Proposal could be the right option for you. At D & A MacLeod Company Ltd., we specialize in helping Ontario residents and businesses find the right debt relief strategies for large debts. Keep reading to learn how a Division I Proposal works and why it might be the best next step if you have too much debt for a consumer proposal.

What Is a Consumer Proposal? A Quick Overview

A consumer proposal is a formal agreement between you and your unsecured creditors to repay a portion of what you owe over a maximum of five years. It’s a popular debt relief option for people with manageable debts, as it helps avoid bankruptcy and stops wage garnishments or collection calls. Consumer proposals typically work well when your debt is under $250,000 (not including mortgages on your principal residence).

At D & A MacLeod Company Ltd., we assist many people in Ontario in using consumer proposals, alongside other debt relief options such as credit counselling, debt consolidation, and personal bankruptcy, depending on their individual needs.

What Is a Division I Proposal? How Does It Work?

A Division I Proposal is similar to a consumer proposal but designed specifically for:

·       Individuals with debts exceeding $250,000 (excluding mortgage debt on a principal residence).

·       Insolvent corporations of any size with outstanding debt.

·       Individuals with complex financial situations requiring a more tailored approach.

Unlike consumer proposals, Division I Proposals can involve negotiating with both secured and unsecured creditors. They provide a legal framework to restructure debts through a Licensed Insolvency Trustee, who acts as the neutral third party overseeing the proposal process.

Here’s how it typically works:

1.    You meet with a Licensed Insolvency Trustee to review your financial situation.

2.     The Trustee helps prepare a Division I Proposal offering creditors a repayment plan or settlement.

3.     Creditors vote on the proposal; if accepted, it becomes legally binding subject to court approval which is required with a Division 1 proposal.

4.     Throughout the repayment period, the debtor makes payments according to the agreed terms.

5.     Once payments are complete, the remaining eligible debts may be discharged.

Division I Proposals allow you to address large debts through an organized, court-approved plan that avoids bankruptcy and its harsher consequences.

What Happens If You Owe More Than $250,000? Too Much Debt for a Consumer Proposal?

When your unsecured debt exceeds $250,000, a consumer proposal isn’t an option under the law in Ontario. This is where a Division I Proposal becomes essential. If you find yourself in this situation, whether from tax debt, personal loans, student debt, or business liabilities, turning to a Division I Proposal can provide relief and financial flexibility.

Other debt relief options, like personal bankruptcy or debtor assist programs, may be considered, but a Division I Proposal is often the best choice to manage high-value debts while preserving your assets and reputation.

Businesses facing insolvency can also rely on Division I Proposals to negotiate and recover financial stability without resorting to bankruptcy or liquidation.

Take Control of Your Debt

If you are overwhelmed by debt exceeding $250,000 or dealing with complex financial challenges, don’t hesitate to contact D & A MacLeod Company Ltd. Our Licensed Insolvency Trustees are here to help you explore Division I Proposals and other large debt solutions to find the right path forward. We offer a virtual appointment, and you can also find our office locations and learn more about our corporate proposals here.

Get expert help and start your journey to debt relief.