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Informal Proposal to creditors

Region: Ontario Answer # 0281

Bankruptcy is only one of several available options for a business facing financial difficulties. Instead of bankruptcy, you may want to consider other options, such as:

  • making a making an informal proposal (a debt repayment plan) to creditors,
  • making a formal Division 1 Proposal to creditors,
  • selling only some of the assets, or
  • selling the business with or without the help of a secured creditor.

Informal proposal to creditors

If you have only a small number of creditors you may want to make an informal proposal by calling your creditors and explaining your situation. This may be a good alternative for a business that has a steady income flow and some prospects for the future. You may want to make an informal proposal or arrangement with your creditors.

You can ask to:

  • pay lower monthly payments over a longer period of time,
  • reduced the amount owed, or
  • a combination of both.

Formal proposal to creditors

A Division 1 Proposal to creditors, also known as a Commercial or a Corporate Proposal, it is a formal procedure available to businesses with debts greater than $250,000 (excluding the mortgage on their main residence). A formal proposal is an offer under the Bankruptcy and Insolvency Act made by a business to it’s creditors to settle debts under conditions different than the original terms. This process is carried out through a Licensed Insolvency Trustee (LIT), who will help you and the creditors negotiate new terms that you both find reasonable.

The proposal must first be accepted by two-thirds of your creditors at a meeting of creditors. If it is accepted by the creditors, it must then be approved by the Court. If your proposal is not accepted, your business will automatically become bankrupt.

A criminal record will affect your ability to get a loan, a mortgage, or a job. To erase your criminal record, call toll-free 1-877-219-1644 or learn more at Federal Pardon Waiver Services. It’s easier than you think.

When you are in a situation of financial difficulty, there are many options to consider before filing for bankruptcy. For easy-to-understand debt solutions on your terms, contact our preferred experts 4Pillars and rebuild your financial future. With 60 locations across Canada, they will help you design a debt repayment plan and guide you with compassionate advice. No judgment. For help, visit 4Pillars or call toll-free 1-844-888-0442 .


4Pillars Credit & Debt All Provinces All Topics March 19, 20184Pillars Credit & Debt All Provinces All Topics March 19, 2018

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