The phone buzzes again: collection calls you don’t want to answer. The bills stack up. The amount owing grows. Maybe it’s credit cards, payday loans, or personal loans. Maybe it’s wage garnishments or threats of legal action from the federal government (CRA). If your bills keep outpacing your income and the stress is crushing, you are not alone.

At some point, you start searching for a way out. That’s when two options keep coming up: Consumer Proposal vs Division 1 Proposal. Both are legal tools under the Bankruptcy and Insolvency Act, filed by Licensed Insolvency Trustees, and both can stop collection efforts in their tracks.

The difference? From how creditors vote to how your credit rating is affected, the rules aren’t the same. And whether you owe $40k in unsecured debts or run a business with unsecured creditors, knowing the fit can change your future.

 

Before We Start, A Quick Look at What Sets Division 1 and Consumer Proposal Apart Both options are filed by a Licensed Insolvency Trustee (LIT) and trigger a stay of proceedings, which means collections, lawsuits, and wage and salary garnishments stop. Neither option is ‘better’; each is designed for different debt situations.

Category	Consumer Proposal (Division II)	Division I Proposal
Who it’s for	Individuals (not businesses) or a bankrupt with unsecured debt up to $250,000 (not counting a mortgage on your principal home)	Individuals with unsecured debt over $250,000, people with complex debt (multiple mortgages, landlords, business owners, prior proposal default), and incorporated businesses
How it starts	Filed by an LIT; consumer proposal prepared and sent to creditors	Filed by an LIT; First Meeting of Creditors must be held within 21 days
Creditor voting	Creditors vote within 45 days; accepted if 50% + $1 of proven claims say “yes”	Creditors vote at/after the First Meeting; needs a majority in number and two-thirds in value of proven claims
Court Approval	Deemed court approval under the Act (actual court appearance is very rare)	Requires court approval after creditor acceptance
Payments	If you miss three monthly payments or a non-monthly payment is more than 90 days late, your Consumer Proposal is deemed annulled automatically	More stringent: only one missed payment is allowed; a second missed payment can trigger default, and the Court may deem you bankrupt
Counselling	Two mandatory credit-counselling sessions	No mandatory sessions, but custom conditions can be included (e.g., therapy for gambling debt, tax compliance)
Outcomes	Often repay only a portion of unsecured debt, interest frozen, keep control of assets (unless terms say otherwise)	Restructures large/complex debts while avoiding bankruptcy; custom conditions possible; keep control of assets (unless terms say otherwise)
Director status	You can remain a director of a corporation	You can remain a director of a corporation
Risk if voting fails	If not accepted or later annulled, creditors’ rights resume	If no agreement is reached, the debtor may be deemed bankrupt (rare; negotiation usually comes first)

These points reflect the rules and practical guidance BNA emphasizes for Alberta filers.

 

Let Me Show You What That Looks Like in Real Life

Story 1: Meet Flora. Her debt was manageable but growing fast.

Flora is 34. She lives in Red Deer. She has $78,000 in unsecured debts: credit cards, a line of credit, personal loans, and payday loans that won’t quit. Her mortgage on her primary residence is current. The math doesn’t work anymore. She can pay something, not everything, with interest piling on.

Her goal:

• Keep her home.
• Get one affordable payment.
• Freeze the interest.
• Avoid personal bankruptcy.

 

The best option was a consumer proposal under the Bankruptcy and Insolvency Act, filed through a Licensed Insolvency Trustee: an interest-free settlement of the debt, paid by monthly payments. 

Collection calls stopped; wage garnishments paused; she kept secured debts. She completed two financial counselling sessions.

 

Story 2: Now, meet Tanner. More debt, more moving parts.

Tanner is 45. He owns a small incorporated business in Calgary. After a tough year, he owes suppliers, landlords, and the Canada Revenue Agency (CRA). Some of the money owed is tied to a corporate line, some to his personal guarantees. His total debts are well over $250,000 in unsecured loans, and his financial situation is complex.

His goal:

• Avoid bankruptcy if possible.
• Keep control of the business while he restructures.
• Create proposal terms that creditors accept.
• Pause collection efforts and regroup.
• Get a legal pause on collections so he can regroup.

 

For Tanner, the right fit was a Division I Proposal. It’s built for larger, complex debts included in business cases. It still halts wage garnishments, protects most assets, and offers a path to debt relief without an automatic bankruptcy.

It still aims to protect assets and operations. It requires a First Meeting of Creditors and a court approval. Conditions can be customized to address creditor concerns, including the Division 1 proposal terms like tax compliance or reporting, to enhance the chances of acceptance. 

 

What Happens Right After You File (Same for Both Paths)

The moment you file a Consumer Proposal or Division 1 Proposal, real change begins. Whether it’s a consumer proposal for unsecured debts or a Division I Proposal for more complex files, our licensed insolvency trustees (LITs) ensure the law works for you.

• Stop collection calls, lawsuits, and wage garnishments with the stay of proceedings.
• Combine all debts into one plan with clear monthly payments, overseen by your trustee.
• Quiet the noise so you can focus on your financial problems, not just avoid creditors.

 

This is the biggest emotional win. It’s not magic; it’s the Bankruptcy and Insolvency Act at work. It gives you space to avoid personal bankruptcy, rebuild your credit report, and take the first step toward a debt solution and a more stable future.

 

Consumer Proposal (Division II): The simple, strong choice for sub-$250k

If your debt isn’t massive (≤$250,000) but still feels unmanageable, a Consumer Proposal might be the most effective legal alternative to bankruptcy.

A Consumer Proposal (Division II) is a legally binding option under the Bankruptcy and Insolvency Act for individuals with debts of $250,000 or less, excluding your principal mortgage. It freezes interest. One monthly payment. No court. Let’s break it down.

 

Is This the Right Fit for You?

If you’re an insolvent person carrying debts under $250,000 (not counting the mortgage on your principal residence), and want a real debt solution without personal bankruptcy, this may be your path. It works best for those who want interest frozen, one predictable payment, and a chance to rebuild their credit rating.

 

What Happens When You Choose This

Filed with a Licensed Insolvency Trustee (LIT), a consumer proposal under the Bankruptcy and Insolvency Act pauses collection efforts, freezes interest, and sets realistic monthly payments so you can breathe.

1. You meet a Licensed Insolvency Trustee (LIT) and share income, expenses, assets, and debts.
2. Together, we design a consumer proposal that creditors are likely to accept.
3. The proposal goes to creditors; they have 45 days to vote.
   • If creditors holding 25% of proven claims request it, a meeting of creditors may be called.
4. If 50% + $1 by dollar value votes “yes”, the plan binds all unsecured creditors.
5. You complete two financial counselling sessions on budgeting, credit, and surplus income.
6. You make the agreed monthly payments (usually up to 60 months).
7. On completion, the included unsecured debts are legally released.

 

When creditors agree, you gain structured debt relief without court days in most cases. This is how consumer proposal work actually feels in practice: you get breathing room, a single plan, and the law on your side.

 

Why So Many People Choose This Instead of Bankruptcy

Because consumer proposals freeze interest, reduce your payments, and begin credit recovery sooner. It’s a predictable debt solution that keeps secured assets in place while payments fit your budget.

• Often repay only a portion of unsecured debt (varies), interest frozen.
• Keep control of assets (unless the terms say otherwise).
• Predictable. Straightforward. No court day in most cases.

 

What You’ll Need to Stick To, So It Doesn’t Fall Apart

Miss three payments, or delay more than 90 days, and the plan is deemed annulled. That means creditors regain rights, and you may need to file a Division I Proposal or face bankruptcy next. Discipline is key; this is what keeps the path to a debt-free life steady.

 

Division I Proposal: Designed for larger or more complex scenarios.

Some debt files are just… bigger. More moving parts, more people involved, more risk if things go sideways. That’s where a Division I Proposal comes in. It’s a formal restructuring tool under the Bankruptcy Insolvency Act for debts over $250,000, and for situations too complex for a standard division 2 or consumer proposal.

 

Who This Option Is Built For

If your total debts or debt structure is just too big or tangled for a standard consumer proposal, this is where a Division 1 Proposal steps in.

• Individuals with debts over $250,000.
• People with complex debt structures (e.g., multiple mortgages, landlords, business owners, and large tax debt).
• Anyone whose previous consumer proposal was deemed annulled with the same creditors.

 

Note: Though Division I can be used by businesses filing a corporate proposal, BNA focuses on helping individuals and small-business owners find a path forward.

 

Here’s How Division I Actually Works in Practice

It starts with clarity. Your Licensed Insolvency Trustee (LIT) maps out your financial situation. What’s owed, to whom, and what can realistically be paid. Then we move fast.

1. Meet the LIT and their team. Map the full picture: business, personal guarantees, tax, and suppliers.

2. File the proposal. A mandatory meeting of creditors must be held within 21 days (can be adjourned for negotiations).
3. Creditors vote. It needs a majority in number and two-thirds in value to pass.
4. If creditors want changes, the LIT coordinates negotiations and amended terms.
5. If creditors accept, the Division 1 proposal proceeds to the Court for approval..
6. Conditions can be added to help acceptance (e.g., tax compliance, counselling for gambling-related debt, progress reporting).

7. You carry out the plan; keep operating if you’re a business; keep control of assets unless the terms say otherwise. 

This isn’t quick-fix territory. The significant difference is flexibility when simpler tools won’t cut it.

 

Why Bigger Debt Doesn’t Always Mean Bankruptcy

• It’s built for scale and complexity.
• It allows custom conditions that reassure creditors and improve acceptance odds.
• It helps avoid bankruptcy with a plan that can match the size of the problem.

 

What keeps this plan working the way it should

The guardrails are tighter here because the stakes are higher.

• Stricter payment discipline: Payment terms are set in your Division 1 Proposal and enforced by the Court. If you fall behind and can’t cure per the proposal terms, the file can go into default; if amendments/negotiations fail, you may be deemed bankrupt.
• If a Division I Proposal was filed to exit a bankruptcy and later defaults or is annulled, you are considered as if you never exited bankruptcy. The original proceedings automatically resume without a new filing.

 

Most people worry about the vote, but it’s more predictable than you think

In a Consumer Proposal, creditors have 45 days. If creditors holding more than half of the proven dollar value approve, the agreement binds everyone in that unsecured group. If creditors holding 25% of proven claims request it, a creditors’ meeting may be called.

On the other hand, creditors must meet within 21 days (meetings may be adjourned) in a Division 1 Proposal. Approval requires two criteria: 1) a majority in number, and 2) two-thirds in value of proven claims.

In both cases, creditors reject proposals less often than you might think. Negotiation is common when they seek improvements.

 

What changes right away once the proposal is accepted

Once your proposal is accepted, whether it’s a Consumer Proposal or a Division 1 Proposal, true relief begins immediately. Certain protections and benefits activate right away, allowing you to breathe easier and focus on moving forward.

• Asset continuity: you generally retain control unless specific terms indicate otherwise.
• Single plan: you know what to pay and when.
• Licensed guidance: your LIT handles votes, paperwork, reporting, and communication with creditors.

 

The payment rules that keep your proposal on track

Success is about fit and discipline. Choose the right tool, then stick to it.

Rule	Consumer Proposal	Division I Proposal
Maximum term	Up to 60 months	Set by proposal; often similar durations
Missed payments	Three missed → automatic annulment (or a lump sum 90 days late)	Only one missed allowance; it must be made up within 30 days. A second miss can trigger default, and you may be deemed bankrupt.
If things fail	Creditors regain rights; you may consider a Division I or bankruptcy	If the court rejects the plan and the agreement fails, you are deemed bankrupt

 

So… which one actually fits your situation best?

Use this fit-first lens, not a “better/worse” mindset.

 

When a Consumer Proposal is usually the better fit

• Your debt is under $250,000 (mortgage on your home isn’t counted).
• You want interest frozen and a steady, affordable payment.
• Your files aren’t complex; one plan can tidy everything.
• You can keep up with payments for up to 5 years.
• You’re open to two counselling sessions to help rebuild.

 

When Division I might be your stronger option

• Your debt is over $250,000, or the structure is complex.
• You run a business or are a director, and you want to stay at the helm.
• You need custom conditions to get creditors onside (e.g., reporting, tax compliance, therapy).
• You can manage stricter payment rules.
• You’d rather negotiate a big-picture plan than risk a disorderly unwind.

 

Worried because of something you read? Let’s sort fact from fiction

Myth	Fact
“A proposal always means court.”	Consumer Proposals are usually deemed approved; court appearances are rare. Division I Proposals require court approval after creditor acceptance.
“If creditors don’t like it, you’re done.”	Most cases involve negotiation. Adjustments and counteroffers from creditors are common when creditors want changes.
“You lose control of everything.”	Proposals are designed so you generally keep control of assets (unless the terms say otherwise).
“Missed payments are no big deal.”	They are. Consumer: 3 misses = annulment. Division 1: A second miss can lead to default, and being deemed bankrupt.
“You can’t be a director in a proposal.”	You can remain a director in both Consumer and Division I Proposals.

 

A typical year in a Consumer Proposal, from the inside out

• Month 1: The stay of proceedings kicks in. The calls stop. You sleep better. You sign your consumer proposal, set up your payments and it goes to creditors.
• Month 2: Voting window closes. You get a decision. If accepted, you continue making payments as normal.
• Months 3–6: You build a rhythm with payments. And you start seeing real progress. Not just the interest, your payments actually go toward the debt itself.
• Months 7–12: You may notice your stress dropping. You adapt your budget to this new normal. 
• Year 2–5: You live your plan. You avoid new high-interest debt. You may pay the proposal early if cash allows.
• Completion: Proposal done. Unsecured debts covered by the plan are released. You keep the lessons learned and the breathing room.

 

What life usually feels like inside a Division I Proposal

Timeframe	Activities
Week 1	File. The stay of proceedings starts. Payroll and operations stabilize. Work with LIT to prepare for the first creditors’ meeting.
Weeks 2–3	First Meeting of Creditors within 21 days. Share the plan. Creditors discuss, ask questions, and vote or request changes.
Weeks 3–8	Handle negotiations with LIT. Creditors may request tweaks, reporting, or milestones. If accepted, it is taken for the Court’s approval.
Months 3–6	Deal is in place; execute. Continue serving customers and stabilizing vendors. Everyone watches the same scoreboard.
Year 1+	Maintain discipline. Meet custom conditions, pay on time, and contact LIT early if issues arise.

 

Unique debt situations we’ve seen and how proposals adapt

No two debt files are exactly alike. Some clients walk in with straightforward numbers. Others? Not so much. We’ve seen it all, from CRA demands to past proposal defaults, and helped shape plans that actually pass.

• Prior Consumer Proposal default with the same creditors → Division I may be required.
• Multiple mortgages/landlords or business-linked obligations → Division I gives more room to tailor conditions.
• When CRA is a major creditor, proposals typically include tax-filing compliance; CRA generally requires all returns to be filed prior to voting.
• Gambling-related debt → proposals can include counselling commitments to support acceptance.

 

These are the kinds of real-world complexities that make fit more important than just choosing a label. It’s not about what sounds simpler — it’s about what works, legally and practically, for your financial situation.

 

Not sure where your situation fits? That’s okay. We offer free consultations, and we’ll help you figure it out. Contact us now →

 

Still unsure? This list might bring things into focus

If most of these are true, consider a Consumer Proposal:

• My debt is under $250,000 (not counting my home mortgage).
• I want interest frozen and one predictable payment.
• I can handle a plan up to 60 months and won’t miss payments.
• I’m fine with two credit-counselling sessions.
• My situation is straightforward; no complicated business pieces.

 

If most of these are true, consider a Division I Proposal:

• My debt is over $250,000 and complex.
• I own or direct a business and need to stay in place.
• Creditors may want conditions (reporting, tax compliance, therapy, etc.).
• I can meet stricter payment rules and not risk a second miss.
• I want to avoid bankruptcy by negotiating a realistic, bigger-picture plan.

 

If the vote doesn’t go through, you still have options

• Consumer Proposal: If the vote fails, collection rights resume. Often, your LIT will discuss options, including Division I or bankruptcy. Outright rejection is very rare in consumer proposals because creditors always get more money than they would get in bankruptcy. 
• Division 1 Proposal: If negotiations fail and there’s no viable agreement, you are deemed bankrupt. Good LITs work to avoid this with solid prep and responsive amendments. It’s rare to reach that outcome because negotiation is the normal path.

 

Why showing up and staying steady makes all the difference

• Automatic payments beat manual transfers.
• Budget with a buffer. If your plan is too tight, talk to your LIT before filing.
• If life changes, speak up early. Most damage comes from silence.
• Counselling isn’t a lecture. It’s practical: triggers, habits, credit rebuild, and a calm spending plan.

 

It’s not just what you do, it’s how you’re supported

One recent reviewer summed it up simply: they felt heard, protected from “aggressive” institutions, and supported so much that they recommended friends who later thanked them. That’s the point of the system: clear rules, steady hands, real relief.

Here’s what they said –

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

 

The path is usually clear once you see the details

• If your debt is under $250,000 and you want a simple, predictable, interest-free plan with two counselling sessions, a Consumer Proposal likely fits.
• If your debt is larger, tangled, or business-linked, and you want the flexibility to negotiate conditions at scale, a Division 1 Proposal is built for that.

 

Both paths are law-backed, trustee-led, and focused on stability. The right one is the one that lets you breathe today and stay steady tomorrow.

 

Bring your questions. We’ll bring steady answers.

If you recognize yourself in Flora, Tanner, or somewhere in between, Talk to a Licensed Insolvency Trustee. For a free consultation, bring debts, last year’s tax return, and a simple budget. Ask blunt questions:

• What would a fair proposal look like for me?
• What do my creditors usually negotiate for in cases like mine?
• What payment amount won’t break my month?
• What conditions might get me to “yes”?

 

You don’t need perfect paperwork to start the conversation. You just need the courage to pick a path that matches your real life and the discipline to walk it.