A proposal is simply a legally binding agreement between a person and her creditors whereby the person pays only a portion of his debts (say one-half), thus avoiding bankruptcy.
A proposal is made to the creditors through a Trustee in Bankruptcy. It does not mean you are bankrupt.
If the creditors vote in favour of the proposal, and the court approves it, then the proposal is a binding contract which all creditors must accept even the creditors who did not vote for the proposal.
Proposals are a better deal for the creditors than bankruptcy and in the vast majority of cases are accepted!
Consider a Consumer Proposal Before Undertaking Credit Counselling Repayment Programs
A Consumer Proposal is a means to negotiate with your creditors for the reduction of you debts and/or extension of time for payment of their debts. The payment schedule that is created in consultation with a your advisor is based on your income, living expenses and family creditors. It prevents your creditors from taking legal actions to seize assets or garnishee wages.
How Proposals are Filed
Under the Bankruptcy and Insolvency Act, a trustee or an administrator files a Proposal or an arrangement between you and your creditors to have you
Pay off only a portion of your debts
Extend the time you have to pay off the debt
Propose some combination of both.
To be acceptable, your creditors must be better off under a Proposal than if you go bankrupt.