Manitoba: MB Personal Proposals; Consumer Proposals and Division I Proposals (used for any amount of debt).

Proposals allow a person to avoid bankruptcy while paying only a portion of the debt.

Proposals are almost always accepted by the creditors because they will get more money than if the person goes into bankruptcy.

View our PowerPoint Presentation on Consumer Proposals.

Division I Proposals

Under the Bankruptcy and Insolvency Act, a trustee or an administrator files a Proposal or an arrangement between you and your creditors to have you pay off only a portion of your debts, extend the time you have to pay off the debt, or provide some combination of both. To be acceptable, your creditors must be better off under a Proposal than if you go bankrupt.

There are two types of Proposals an individual can file:

Consumer Proposals

Available to debtors owing only consumer debt amounting to less than $250,000, excluding a mortgage on the principal residence;
Cannot be for a term of more than 5 years;
Stay of Proceedings is in effect;
Can only be filed through a trustee in bankruptcy or an administrator of consumer proposals;
The creditors must be better off under a Proposal than under a bankruptcy.
Administrator must file a report to the creditors on the affairs of the person and the causes of financial difficulty;
If no objection to the consumer proposal is received within 45 days of the filing of the consumer proposal it is deemed to have been accepted by the creditors;
If no objection to the consumer proposal is received within 15 days after the deemed acceptance of the consumer proposal it is deemed to have been approved by the court;
Any dissent to the consumer proposal, received prior to 45 days of the filing is deemed to be a request for a creditors’ meeting;
Creditors vote at the meeting with a simple majority of the dollars voted deciding on acceptance or refusal of the proposal;
Debtor is required to take two counselling sessions; (This requirement has been overturned by the courts. The new bankruptcy law passed on November 25, 2005 that will not be enacted until June 30, 2006 at the earliest, makes this a requirement again. Section 66.38 of the BIA.)
If the creditors do not accept or the court does not approve the consumer proposal the debtor cannot make another consumer proposal;
The debtor is not automatically bankrupt if the consumer proposal is not accepted.

Other Proposals or Division I Proposals

There is no restriction on the amount a person owes. He can owe less or more than $250,000 to be eligible. If the creditors do not accept the Proposal the person is automatically bankrupt effective on the date of the Creditors' Meeting or the date the court rejected the Proposal. If the proposal is accepted counselling is not required.

Meeting of Creditors to Consider the Division I Proposal

Creditors vote on the Proposal in person or by mail at a creditors' meeting held approximately three weeks after the Proposal is filed. The trustee must file a report to the creditors on the affairs of the debtor and causes of the financial difficulties. The trustee must also present to the creditors his estimate of what the creditors would realize under a bankruptcy as compared with the amount they are being offered under the Proposal. In order for the Proposal to be justified, the creditors must be better off under the Proposal than they would be under a bankruptcy.

The Proposal must receive approval by at least 66.6% (2/3) in dollars and 50% plus one in number of eligible creditors who vote, and the Proposal must be approved by the Court. If the Proposal is accepted by the creditors and approved by the Court then all unsecured creditors are bound by the Proposal; not just the creditors who voted in favour of the Proposal.

If the Proposal does not receive the required votes the debtor is immediately bankrupt effective on the date of the creditors' meeting.

Canadian Law