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Can a debtor still qualify for a consumer proposal if said debtor’s unsecured debt is greater than $75,000 but less than $100,000?

Hello. Can a debtor still qualify for a consumer proposal if said debtor’s unsecured debt is greater than $75,000 but less than $100,000? If so, how does the vote work if one of the creditors holds the majority of the unsecured debt meaning if the majority of the creditors holding the lesser debt agree to the proposal and the one creditor holding the larger portion of the debt does not agree, will the proposal still pass and be approved? Another twist, what if the creditor holding the larger amount of unsecured debt also has a mortgage with this same debtor?

Thanks in advance for your expertise and knowledge.

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One Response to “Can a debtor still qualify for a consumer proposal if said debtor’s unsecured debt is greater than $75,000 but less than $100,000?”

Barton Goth, GCO Inc. Bankruptcy Trustees said...

No, the $75,000 is not flexible. You would have to file a Division I Proposal. This is very similar to the consumer proposal, just intended for situations with larger debt loads. With a Division I proposal there are a few changes that you need to be aware of:
1. A higher percentage of votes is required for success (66 2/3 % in value and majority in number);
2. If the creditors vote against the proposal, or you should default on the terms of the proposal you will automatically be in bankruptcy.

With the voting, in a consumer proposal you have to have the majority of creditor voting in favor. This is measured in value not in number. In the Division I scenario you have to take into account both the value and number of votes. As for a creditor holding the mortgage, this really has no impact as a secured debt technically operates outside of the proposal proceedings.