Some debts aren’t just large, they’re layered. Business obligations, past consumer proposals, or unsecured debt that’s quietly multiplied over time. If that sounds familiar, a Division 1 Proposal might be your next step.
This isn’t about giving up. It’s about choosing a court-supervised, pressure-free path toward debt relief. One that pauses collection calls, brings creditors to the table, and helps you avoid personal bankruptcy.
In this guide, we’ll walk through who qualifies, how the formal procedure works, what makes it different, and how long it takes. All reviewed by Licensed Insolvency Trustees at BNA Debt Solutions (Calgary, Alberta).
First things first: is this the right path for you? Let’s check.
The 30-second fit check: Is Division 1 likely your lane?
Not every debt fits in a tidy box. Sometimes the money owed comes from different directions. Business, personal, maybe a past consumer proposal that didn’t quite work out. You’ve tried to keep up, but the pressure keeps building.
If you’re wondering whether a Division 1 Proposal in Alberta might be the right path, this list can offer some clarity. It’s not a diagnosis; it’s just a quick checklist for anyone feeling overwhelmed, complex, or stuck.
You’re likely a fit if:
- Your total debts exceed $250,000 (excluding the mortgage on your principal residence).
- You owe a mix of unsecured creditors and secured lenders (e.g., unsecured loans, car loans, or rental property mortgages).
- Your financial situation is complex (multiple assets, business ties, or mixed income sources).
- A previous consumer proposal (Division II) was annulled or defaulted, and you can’t file again with the same creditors.
- You’re recovering from bankruptcy and are now able to make a Division I Proposal to exit bankruptcy.
- You need more than 5 years to repay (Division I Proposals can exceed 60 months if justified).
- You’re facing collection calls, wage garnishments, or legal action, and need a stay of proceedings to pause them.
- You’re a small-business owner needing a structured corporate proposal.
- The Canada Revenue Agency is involved, and tax-return compliance may be a condition of creditor approval.
You don’t have to figure this out alone. A free consultation with LITs from BNA can help clarify what’s possible, without judgment or pressure.
If this sounds like you, here’s what a Division 1 Proposal actually is
Take a moment. You are not alone, and you have options. If even a few of those checklist items rang true, you might be wondering: “Okay… but what is this thing, really?”
A Division 1 Proposal is a structured debt repayment plan backed by the Bankruptcy and Insolvency Act. It’s not bankruptcy, but it offers real legal protection. Once filed by a Licensed Insolvency Trustee (LIT), it triggers a stay of proceedings under the Bankruptcy and Insolvency Act. This legal pause stops lawsuits, collection calls, and wage garnishments.
It’s a formal procedure, where you, as the debtor, work with your trustee to repay part of what’s owed in monthly payments, a lump sum, or a mix over a specific period. If creditors vote to accept and the court approves it, the deal becomes binding, and you’re on your way to being legally released from eligible unsecured debt.
Why creditors accept
- It’s designed to offer more money than they’d recover through personal bankruptcy.
- The terms are clear, the payments are structured, and there’s a definite end in sight.
- The process helps both sides avoid the uncertainty of bankruptcy or further legal action if a proposal were rejected.
We’ll talk next about the part that causes the most confusion: How is this different from a Consumer Proposal, and why would you choose one over the other?
Now that you get the idea, how is this different from a Consumer Proposal?
We get asked this all the time, and it makes sense. Both options sound similar, both involve a Licensed Insolvency Trustee, and both help you avoid personal bankruptcy. But the Division 1 Proposal is built for a different scale: more complex, more debt, more moving parts.
Here’s a quick side-by-side to help you spot the main differences.
| Topic | Division I Proposal | Consumer Proposal (Division II) |
| Typical Debt Size | Over $250,000 debt, or layered unsecured debt, business-linked, or higher dollar value | Up to $250,000 in personal debt |
| Term | 1–5 years (can go longer with justification) | Max 5 years |
| Meeting | Mandatory First Meeting of Creditors within 21 days | Meeting only if 25% (by proven claims) request one |
| Voting | Must pass a double majority: majority in number and two-thirds of the amounts owing | Creditors vote, but rules differ under Division II (approved by ordinary resolution: 50% + 1 by $ value) |
| Court | Requires court approval after creditor acceptance | Deemed approved under the Act (rarely requires court) |
| Use Cases | Ideal when debt is complex: prior consumer proposal annulled, business involved, or high income with cash flow issues | Better for simpler debt with stable income |
Whether you’re trying to restructure a corporate proposal or find room to breathe as an insolvent person, choosing the right path makes a significant difference (in stress, time, and recovery).
If Division I looks right, here’s how the process actually unfolds
It’s easy to imagine this will be long, messy, or unpredictable, but the truth is: a Division 1 Proposal follows a steady path. You’re not guessing your way through it. There’s a plan, and someone is guiding you through the steps.
From that first quiet conversation to the moment you’re legally released from your eligible unsecured debt. Here’s how the process works:
Step 1: Talk to an LIT (free, confidential)
Your first step is a conversation, not a commitment. A Licensed Insolvency Trustee (LIT) from BNA will help you review your debts, income, assets, and any business context.
We’ll walk you through every path, including whether to file a Division 1 proposal, a consumer proposal, bankruptcy, or consolidation, and help you see what fits. It’s about understanding your full financial situation, not pushing a single solution.
Step 2: Build the proposal
Once you’re ready, we’ll start shaping the proposal itself. A realistic debt repayment plan based on your income, expenses, and what makes sense for your life.
If protection from creditors is needed while we build, we’ll file a Notice of Intention (NOI) to Make a Proposal so you’re protected during this period.
Together with your LITs at BNA, you’ll prepare a clear picture of cash flow and create a settlement offer, including how you will pay it (monthly, lump sum, or a mix). The goal is to offer creditors a substantial amount more than they’d receive in a bankruptcy scenario, and give you a path to debt relief without losing control.
Step 3: File and get the automatic stay
When your Division 1 Proposal is ready, your trustee files it with the Office of the Superintendent of Bankruptcy (OSB), and from that moment, the stay of proceedings is in effect, and the collection activity begins to stop.
Wage garnishments, collection calls, and ongoing legal action are stopped under the Bankruptcy and Insolvency Act. You don’t have to manage the creditors anymore; your LIT takes over. For many, this is the first real breath. A hard season doesn’t end overnight, but the pressure finally lets up.
Step 4: Creditors review, meet, and vote
After filing, there’s a 21-day review window. During this time, your unsecured creditors look over the proposal and prepare for the mandatory meeting.
At that meeting, your LIT is generally the chairperson who moderates the meeting. To move forward, the plan needs a double majority: most creditors (by number), plus at least two-thirds of the dollar value owed, must vote yes. This step turns your Division 1 Proposal into a shared agreement. One that brings structure, fairness, and a chance to avoid bankruptcy for everyone involved.
Step 5: Negotiate if needed
If creditors reject the initial Division 1 Proposal or request changes, don’t worry – it’s part of the process, generally it’s a reasonable request. Your LIT will assist you in revising the offer, often adjusting the settlement amount, payment timeline, or terms.
Outright rejection is rare. Most files move forward after tweaks that still honour your limits and lead toward debt relief, not more pressure. It’s still your plan. Just refined.
Step 6: Court approval
Once creditors accept your Division 1 Proposal, it heads to court for a final check. A registrar reviews the file to ensure it meets the requirements of the Bankruptcy and Insolvency Act, is feasible, and provides creditors with a better return than bankruptcy.
This isn’t about judgment. It’s about confirming that your plan holds up for you, for your unsecured creditors, and for the process itself. When the court approves your proposal, the terms become binding and your payments continue under that agreement.
Step 7: Make payments and complete
From here, it’s about staying the course. You’ll make payments on your Division 1 Proposal as agreed: monthly, seasonal, or a one-time lump sum, depending on what was filed.
Your LIT at BNA handles the rest: distributing funds to creditors and tracking progress. An early payoff (from a raise, sale, or bonus) is welcome and sometimes strategic, if permitted under your proposal.
Once your final payment is made, you’ll receive a Certificate of Full Performance, and your eligible unsecured debt is officially discharged.
If you miss a payment, contact your LIT right away so it can be corrected. A second missed payment risks default and, in some cases, being deemed bankrupt.
When your file isn’t standard (NOI, CRA, conditions)
Some Division 1 Proposals need a bit more room to breathe and more time to finalize terms. If you need immediate protection from legal action or collection efforts, we can file a Notice of Intention to Make a Proposal (NOI).
It triggers an automatic stay and gives an initial 30 days to prepare the proposal (cash-flow statement and creditor list due in 10 days; extensions may be granted by the court).
Certain files include conditions like credit counselling or behavioural terms, especially if issues like gambling or past non-compliance are involved.
When CRA is a major creditor, your tax filings must be up to date before they will vote in favour of a proposal. And because every day counts in a situation like this, let’s talk about timing. What happens when, and how long each step really takes.
So… how long does all of that take in real life?
We know, when you’re overwhelmed, even waiting a few days can feel like forever. But here’s the good news: a Division 1 Proposal in Alberta follows a clear path. There’s a schedule, a rhythm, a plan you can actually pin to a calendar. And once it’s in motion, you’ll feel the pressure start to lift.
What happens when
- Immediately: Once your Division 1 Proposal is filed, the stay of proceedings takes effect immediately upon filing: collection calls, wage garnishments, and legal action stop.
- Days 1–21: Unsecured creditors review your file. A mandatory meeting is held during this period.
- Day 21+: Creditors vote. If the proposal is accepted, it moves to court.
- After the vote: A registrar grants court approval (usually within a few weeks).
- Admin & payment processing: Cheques take a few days to clear, and our team also needs time to process documents.
- Duration: Most proposals last 1–5 years. Terms may include monthly payments, a one-time lump sum, or a custom mix.
- End: Once your final payment is made, you’re legally released from eligible unsecured debts and one step closer to a clean slate.
If things go off track
Even with the best intentions, life can still throw curveballs. A Division 1 Proposal gives you structure, but it also builds in room to recover if something shifts along the way.
- If you miss one payment, you generally have 30 days to make up a missed payment before default is recorded. This is where your LIT steps in with support, not judgment. The goal is to stay on track, not punish a rough month.
- But if you fall behind by two payments and can’t resolve it within the proposal terms, your file can go into default. From there, your LIT from BNA may help you review and determine if any other option or catching up on payments is possible. However, if that fails and/or creditors reject the changes, you may be deemed bankrupt under the Bankruptcy and Insolvency Act.
It sounds harsh, but here’s the truth: most people don’t get to this point. Because your debt repayment plan is designed with your real income, expenses, and limits in mind. If it’s workable from the start, it’s more likely to work all the way through.
And If Creditors Push Back? Here’s What Usually Happens
Most files don’t hit brick walls; they just take a little reshaping. If your Division I Proposal needs tweaks, your LIT will work through revisions with you, often adjusting the debt repayment plan to better reflect what creditors are willing to accept.
Outright creditors’ rejection is rare. But if every option is explored and still no agreement is reached, you could be deemed bankrupt under the Bankruptcy and Insolvency Act. That’s not common. Most proposals succeed, not because they’re perfect, but because they’re possible.
Meanwhile, what shows on your credit report and for how long?
Let’s start with the basics: a Division I Proposal remains on your credit report for three years after your final payment or six years from filing – whichever comes first. The credit bureaus set this timeline and apply it across Canada, including Alberta.
For comparison:
- A consumer proposal follows the same rules: three years after completion or six years from filing.
- A first-time bankruptcy stays on your record for six years after discharge in Alberta.
- A second bankruptcy remains for fourteen years.
So yes, there’s an impact. But in most cases, people considering a Division I Proposal already have serious marks on their credit rating due to missed payments, legal action, or even wage garnishments. In other words, the damage is already there. Filing doesn’t make it worse; it starts the clock on recovery.
As you move through your debt repayment plan, your history will reflect steady payments, which can slowly rebuild trust with lenders. Many people begin improving their credit as early as a year into the process.
A proposal gives you a framework, but what you do with it can change your story.
Okay, What Debts Are Covered and What Keeps Going?
Think taxes, cards, and loans. Your Division I Proposal deals with most unsecured debt, but some debts continue alongside it, especially if they’re tied to property or government compliance.
- Debts included: most unsecured debts, such as credit cards, payday loans, personal loans, lines of credit, and eligible tax debts.
- CRA: proposals can include tax debt, but all prior returns must be filed before CRA will consider or vote on the proposal.
- Secured debts: secured obligations (e.g., mortgages, car loans) continue outside the proposal and must stay current to retain the asset.
If you’re coming in for a meeting, bring these so we can move fast
No need for perfection, just numbers that reflect your real life. The sooner we understand your financial situation, the faster your LIT can shape a Division I Proposal that fits.
- List of creditors with amounts owing. Screenshots or statements showing balances are fine. Note who’s secured (like a mortgage) vs. unsecured creditors (like credit cards or payday loans).
- Your most recent tax return and current CRA status, especially if tax debt is part of your file.
- A real breakdown of your monthly income and expenses, plus your assets, liabilities, and any legal action already underway (lawsuits, wage garnishments, etc.).
- If you run a business, let us know whether this might involve a corporate proposal under the Bankruptcy and Insolvency Act; the rules shift slightly when a corporation is involved.
And because we’re in Alberta, some local terms might come up, like Division 1 Proposal Alberta or trustee vs. lawyer. Don’t worry. We’ll walk you through every piece.
Alberta Specifics: Terms You’ll Hear and What They Mean
Every province has its quirks. In Alberta, here’s how some of the key terms actually land in real life and how they connect to the Bankruptcy and Insolvency Act.
- Your LIT at BNA isn’t here to judge or take sides. We act as a neutral officer of the court, balancing the debtor’s legal rights with what’s fair to unsecured creditors like banks or the CRA.
- If your Division I Proposal doesn’t get enough votes or if things fall apart down the line, the process doesn’t automatically “force” you. The legal term is that you may be deemed bankrupt, and even then, we’ll walk you through what that means and what comes next.
- Unlike a consumer or Division II proposal, there are no mandatory credit counselling sessions built into a Division 1 Proposal in Alberta. That can make the process feel a little more focused and flexible, especially if you’re managing a business or a large debt repayment plan.
It might sound complex, but we’ll break it down every step of the way. And if you’re wondering how this is actually playing out for real people right now? Here’s what we’re seeing on the ground in Alberta.
What we’re seeing in Alberta right now (quick patterns)
From households to small businesses, a clear pattern is emerging.
More Albertans, especially professionals and incorporated small business owners, are choosing a Division I Proposal over personal bankruptcy because their unsecured debt is too tangled for other options. It’s not just for corporations anymore.
They’re drawn to the transparency and stability of working with BNA’s Licensed Insolvency Trustees, especially when they want a respectful, structured way forward.
“Contacting BNA Debt Solutions for assistance to sort out my financial issues proved to be a smart decision. With their proposed solution, invaluable guidance and expertise, I was able to positively and effectively address my issues in a way I never thought of.
Their professional, courteous team communicated with me compassionately and efficiently. They clearly explained the initiatives and steps necessary, and they responded promptly to any concerns.
I felt taken care of and respectfully guided out of my financial predicament. It was a true pleasure to work with them. I highly recommend them.” – Paul Muellner
One Last Question Before You Decide?
Most people considering a Division I Proposal in Alberta don’t show up with perfect paperwork or total clarity. They show up with stress, deadlines, and questions. That’s normal.
At BNA, our LITs and team walk you through the full picture: business, personal, secured, and unsecured. Sometimes, the best path is a Division I Proposal, a Consumer Proposal, or another form of debt relief. Your LIT will walk through each option objectively.
It starts with a conversation, not a commitment.
