A Division 1 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.
Process
Set up an appointment with Gregory and his team. Gregory will walk
you through the process of filing a DIV 1 proposal and help you find the
right trustee for the job. A trustee is someone who will work with you
and your adviser to develop a Division 1 proposal that works for both
you and your creditors.
Once completed the trustee will file the proposal, or the notice of
intention to file a proposal, on your behalf (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). As well,
secured creditors have the option of being part of a Division 1
proposal.
Responsibilities of the Debtor
· disclose all of his or her assets (property) and liabilities (debts) to the trustee;
· attend the first meeting of creditors;
· attend two counselling sessions;
· advise the trustee in writing of any address changes; and
· generally assist the trustee in administering the 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.
The trustee will set up a meeting of creditors where creditors will
vote to accept or reject the proposal. At the meeting of creditors, the
trustee 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 2/3’s 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 1 proposal is accepted,
· you will be responsible for paying either a lump sum or periodic
payments to the trustee 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 honored, then the trustee or a creditor may
apply to the Court for the proposal to be annulled and you’ll be placed
into bankruptcy.