The Bankruptcy and Insolvency Act (BIA)
Understanding Your Options for Debt Restructuring
Understanding Your Options for Debt Restructuring
When you are facing severe financial pressure, it can feel like bankruptcy is the only option. Fortunately, Canada’s Bankruptcy and Insolvency Act (BIA) provides several legal frameworks that allow struggling companies and individuals to restructure, stabilize, and recover.
At Crowe MacKay & Company, our Licensed Insolvency Trustees (LITs) are federally authorized to help businesses navigate the BIA, from filing a Division I Proposal to advising on alternatives that preserve you or your company’s value and reputation.
What Is the Bankruptcy and Insolvency Act (BIA)?
The Bankruptcy and Insolvency Act (BIA) is Canada’s federal legislation that governs how individuals and businesses can resolve insolvency situations in which debts cannot be paid as they become due.
It establishes the rules for:
- Bankruptcies (liquidation of assets to pay creditors)
- Proposals (formal restructuring arrangements)
- Receiverships and commercial reorganizations
Under the BIA, only a Licensed Insolvency Trustee can administer these legal processes. Their role is to ensure fairness between debtors and creditors while helping viable businesses find a path forward.
What Is a Division I Proposal?
A Division I Proposal is a formal, court-supervised restructuring process available under the BIA for incorporated businesses and individuals with debts exceeding $250,000 (excluding a mortgage on a principal residence).
This process allows a company to:
- Negotiate new payment terms with creditors
- Reduce or settle debt for less than the full amount.
- Convert debt into equity.
- Restructure contracts and leases.
- Continue operating while regaining financial stability.
Unlike informal negotiations, a Division I Proposal becomes legally binding once approved by creditors and the court — ensuring protection from further collection or enforcement actions.
What Are the Benefits of a Division I Proposal?
A Division I Proposal can be a lifeline for financially distressed companies by allowing them to:
- Avoid bankruptcy while keeping control of assets and operations
- Preserve jobs, contracts, and client relationships.
- Reduce overall debt obligations.
- Pause creditor actions such as lawsuits, garnishments, or asset seizures.
- Improve long-term viability with a structured repayment or settlement plan
How Does the Division I Proposal Process Work?
Initial Assessment
The process begins with a consultation with a Licensed Insolvency Trustee. Together, you’ll review your company’s finances and determine whether a Proposal or another restructuring option.
When Should You Consider Filing a Proposal Under the BIA?
A Division I Proposal may be suitable if:
- Your business has a viable core operation but is burdened by short-term debt.
- You’re facing pressure from CRA or major creditors.
- You need time to restructure financing, leases, or supplier agreements.
- You want to avoid liquidation and preserve company value.
However, if the Proposal is not filed on time or if creditors or the court reject it, the BIA provides that a deemed bankruptcy will occur automatically.
Division I Proposal vs. Bankruptcy
|
Aspect |
Division I Proposal |
Bankruptcy |
|
Goal |
Restructure debt and continue operating |
Liquidate assets and close the business |
|
Control |
Debtor remains in possession of assets |
Trustee assumes control of assets |
|
Creditor Impact |
Creditors receive partial repayment |
Creditors receive proceeds from liquidation |
|
Court Involvement |
Required for approval |
Required for discharge |
|
Outcome |
Business survives under new terms |
Business ceases operations |
How Crowe MacKay & Company Can Help
Our team has helped hundreds of businesses across B.C. manage their debt through BIA restructuring.
We provide:
- Clear, practical guidance on your restructuring options
- Complete preparation and filing of NOI or Proposal documents
- Communication and negotiation with creditors
- Court representation and proposal administration
We’ll help you determine whether a Division I Proposal or another restructuring option — such as a CCAA filing or informal creditor arrangement — is best suited to your circumstances.
Want to Find Out If You’re Eligible?
If you have questions on the BIA in Vancouver or Surrey, contact our Licensed Insolvency Trustees by calling (604) 689 3928, emailing [email protected], or filling in the form below.
Book a Free Consultation
Our licensed experts are here to answer all your questions about bankruptcy and consumer proposals. Whether you're an individual or a business, we’ll help you understand your options and guide you through every step of the process with care and confidence.