Consumer proposal

A consumer proposal sits in Division II of Part III of the Bankruptcy and Insolvency Act. In a small-business deal you meet it when the seller is a sole proprietor, or an owner with personal debts alongside the business. The Office of the Superintendent of Bankruptcy describes it as an offer debtors put together working with a Licensed Insolvency Trustee. See also selling a failing business before going bankrupt.

Who can make one

Section 66.12(1) says a consumer proposal may be made by a consumer debtor, subject to subsections 66.12(2) and 66.32(1). A consumer debtor is an individual who is bankrupt or insolvent and whose aggregate debts, excluding debts secured by the individual’s principal residence, are not more than the amount the definition sets or any other prescribed amount. The proposal is made to the creditors generally, and under section 66.12(4) any creditor may respond by filing a proof of claim with the administrator. A consumer debtor who has filed a notice of intention or a proposal under Division I cannot make one until that trustee has been discharged.

What to ask

• Whether the owner has filed a consumer proposal, and whether the administrator has been discharged
• Which creditors, including any secured creditor, the proposal covers
• How the sale proceeds fit with the terms the creditors accepted, and who at the trustee’s office can confirm that