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Commercial Consumer Proposals in Ontario

If you run a business and owe less than $250,000 in unsecured debt, a Commercial Consumer Proposal settles that debt for a reduced amount without bankruptcy and without shutting the business down. It is the same legal mechanism as a personal Consumer Proposal, applied to a business owner’s situation.

  • For business owners under $250,000 unsecured
  • Division II of the Bankruptcy and Insolvency Act
  • Stops collection action and creditor lawsuits
  • Keep operating while you repay
  • A law firm acting for you, not your creditors
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What Is a Commercial Consumer Proposal?

A Commercial Consumer Proposal is a Division II proposal used when a business owner, most often a sole proprietor or an owner carrying personal guarantees, needs to settle business-related debt. The $250,000 ceiling excludes any mortgage on a principal residence.

It matters most where business and personal debt have become tangled. If you signed a personal guarantee on a lease, a supplier account or a line of credit, that debt is legally yours, and a commercial proposal can deal with it alongside the rest.

At Metus Lykos Debt Law Firm we advise you throughout. Only a Licensed Insolvency Trustee can file the proposal itself, and we coordinate that filing while representing your interests.

What Business Debts Can Be Included?

Trade and Supplier Debt

Business Credit Cards

Business Lines of Credit

Unsecured Term Loans

CRA HST and GST Arrears

Corporate Income Tax Debt

Commercial Lease Arrears

Merchant Cash Advances

Equipment Loan Shortfalls

Judgments Against the Company

Unpaid Professional Fees

Shareholder Loans

Debts NOT Included

CRA Source Deductions (director liability)

Secured Equipment Loans

Commercial Mortgages

Court Fines and Penalties

Debts Arising From Fraud

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How a Commercial Consumer Proposal Works

The process runs under federal law and is the same across Ontario. Here is what it looks like from the owner’s side.

01

We review the business and your personal exposure

We map what the company owes, what you have personally guaranteed, and which obligations are secured. Owners are often surprised by how much sits in their own name.
02

We confirm you are under the $250,000 ceiling

Above that threshold a Division 1 Proposal applies instead. Getting this wrong wastes weeks, so we confirm it before anything is prepared.
03

We build a proposal creditors will accept

The offer has to be better for creditors than your bankruptcy would be. We structure it around what the business can genuinely sustain.
04

We coordinate the filing with a Licensed Insolvency Trustee

Only an LIT can file. On filing, a stay of proceedings stops collection action, lawsuits and garnishment by unsecured creditors.
05

Creditors vote within 45 days

Approval is by majority of dollar value among creditors who vote. Suppliers you still trade with often support a proposal that keeps you as a customer.
06

You repay on agreed terms and keep trading

One scheduled payment replaces the unsecured creditors. The business continues operating throughout.

Commercial Consumer Proposal: Pros and Cons

Pros

The benefits of a consumer proposal

  • Settles unsecured business debt for less than the full balance
  • Stops creditor lawsuits and collection action on filing
  • The business keeps operating
  • Deals with personally guaranteed debt at the same time
  • Costs far less than a Division 1 Proposal
  • No court approval required in the ordinary course
  • Binds every unsecured creditor once accepted
  • Avoids the reputational damage of a bankruptcy

Cons

The disadvantages of a consumer proposal

  • Capped at $250,000 in unsecured debt
  • Secured lenders keep their rights over the collateral
  • CRA source deductions remain a director liability
  • Requires full financial disclosure of the business
  • Recorded on your personal credit file

Is a Commercial Consumer Proposal Right for Your Business?

  • A Commercial Consumer Proposal may fit if:

  • You owe under $250,000 in unsecured business debt

  • You are a sole proprietor or carry personal guarantees

  • The business is viable but cannot service its current debt

  • Suppliers or lenders have started collection action

  • You want to keep trading rather than wind down

  • You want to avoid both corporate and personal bankruptcy

  • You want a lawyer representing you through the process

If your unsecured debt exceeds $250,000, a Division 1 Proposal applies instead. If the company needs operational as well as financial reorganisation, see corporate debt restructuring. For personal debt outside the business, our Consumer Proposal service covers it.

We reduce your debt. Not your dignity.

Commercial Consumer Proposal FAQs

The legal mechanism is identical. The difference is the debt being settled. A commercial proposal deals with business obligations and personally guaranteed debt, and the analysis focuses on whether the business can keep trading.

No. A Consumer Proposal under Division II is available to individuals, including sole proprietors and owners personally liable for business debt. An incorporated company with unsecured debt over $250,000 uses a Division 1 Proposal.

No. Continuing to trade is usually the point. A proposal is generally accepted only because creditors expect a better outcome from an operating business than from a liquidation.

A personal guarantee is your own debt in law. If you are the one filing, guaranteed amounts can be dealt with in the proposal. This is often the main reason owners use this route.

Corporate income tax, HST and GST arrears can generally be included. Payroll source deductions are treated differently, because directors carry personal liability for them, and that liability is not simply erased.

Creditors included in the proposal are notified, because they vote on it. In practice suppliers frequently vote in favour, since a proposal keeps a paying customer trading rather than losing the account entirely.

Preparation usually runs one to three weeks. Creditors vote within 45 days of filing. Repayment terms run up to five years and can be completed early.

A trustee administers the filing and must remain impartial. They cannot advocate for you. We advise on your exposure, negotiate the terms, and represent your interests. Read our comparison of trustees and debt lawyers.

Unlike a Division 1 Proposal, rejection of a Division II proposal does not put you automatically into bankruptcy. We can negotiate amended terms or look at other routes.

Our Service Area

Real Debt Help, Wherever You Are in Ontario

Metus Lykos Debt Law Firm proudly serves clients across the entire province of Ontario. Wherever you call home, our lawyers are ready to review your situation and explain your legal options — confidentially, and free of judgment.

Toronto

Markham

Mississauga

Brampton

Ottawa

Hamilton

London

Windsor

Don't see your city listed? We work with clients across all of Ontario, in person and remotely. If you live in the province, we can help.

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