What is the difference between a Consumer Proposal and Division 1 Proposal?

Consumer Proposals vs Division 1 Proposals

There are 2 types of proposals that are allowed under the Bankruptcy and Insolvency Act ("BIA"). They are found under Division 1 and Division 2 of the BIA. Division 2 proposals are commonly knows as "Consumer Proposals (and will be referenced as such in this section).

Although the terms and laws for this proposal are similar to Division 2, there are less restrictions (as noted below).

Division 1 - Proposals

Division 2 - Consumer Proposals

Who can file this type?

A proposal under Division 1 can be filed for an individual, a corporation, or partnership.

A proposal under Division 2 can ONLY be filed by an individual with less than $250,000 of unsecured debt.

Deemed Bankruptcy Rules

If a Division 1 proposal is rejected by creditors, not approved by the court, or defaulted on from non-payment), then the debtor is deemed to be bankrupt.

There is NO deemed bankruptcy rules in a consumer proposal


The cost to file a Division 1 proposal is significantly higher then a consumer proposal. In many cases, this cost must be paid the by the debtor.

Lower cost option for individuals with less then $250k of debt.


No specific rules

Length of the proposal must be completed within 5 years

Deemed acceptance rules

No specific rules

Deemed acceptance by creditors and court is available

Types of debt that can be included

The same debts are included in a consumer proposal and a bankruptcy. Common examples include:

  • Credit Card
  • CRA Income tax debt
  • Student loans *
  • Line of Credit
  • Unsecured Loans
  • Payday Loans

What happens to your assets?

You get to keep your assets.

You get to keep your assets.

* Student loans are only included if you have been out of school for 7 years on the date you filed a Division 1 proposal or consumer proposal.