A consumer proposal is a popular debt settlement program, but how much does it cost?

In this guide, you’ll learn about consumer proposal costs and how they are calculated.

Here’s everything that we’ll cover in this article:

How much does a consumer proposal cost?

The cost of a consumer proposal is different for everybody. It depends on the amount you owe, the creditors involved, your income and whether you have any assets.

Simply put, you pay back as much as you can afford during a consumer proposal.

Consumer proposal cost

Use our consumer proposal calculator to compare how much your debt repayments might be in a consumer proposal over five years compared to other debt relief options.

How much do you pay back in a consumer proposal?

Often, you repay your creditors a percentage of what you owe, with the remainder forgiven. You can sometimes reduce your debt by up to 80%.

Reduce your debt by up to 80% with consumer proposal.

Essentially, you’re working with your creditors to reach a compromise on your debts. While it needs to be affordable for you, your creditors must recoup enough to make them want to accept a reduced offer.

In other words, you must offer creditors more money than they would receive if you declared personal bankruptcy.

You will most likely be rejected if you offer less because your creditors stand to profit more from you filing for bankruptcy.

Although you must be able to make regular payments, you can pay over five years to ensure it’s affordable.

Calculating cost of a consumer proposal

In most cases, you’ll find that a consumer proposal is cheaper than other debt relief options in Canada. The payments will never increase, even if your income increases.

The cost of a consumer proposal is calculated by a Licensed Insolvency Trustee, a federally regulated and licensed professional responsible for administering your consumer proposal.

Let’s look at how a consumer proposal cost is calculated:

Income and expenses

Like personal bankruptcy, a consumer proposal uses your income and expenses to determine how much you can afford to repay each month.

During an initial assessment, your trustee will work with you to establish your household budget for your family size to determine if a consumer proposal is feasible.

Assets

Next, your trustee will look at what you own and advise how to best protect these assets before filing a consumer proposal.

For instance, you can safeguard your home by offering an amount equal to the equity in your home. This ensures your creditors receive the same amount as they would if you declared bankruptcy. That goes for your car, too.

You can protect anything you own, such as savings and investments, pensions, tax refunds and any additional income received during your proposal.

Eliminate debt but protect your assets such as your home car and savings.

Some of these are protected under federal or provincial law, while others are protected if you include their value in your consumer proposal offer.

In short, if you have lots of assets, you will probably pay more than someone with no assets.

Your debts

With a consumer proposal, the amount you repay depends on how much you owe.

Some lenders look for a certain percentage of debt to be repaid, but typically you can reduce your debt to a manageable amount. A consumer proposal can sometimes reduce your debt by up to 80%.

Your trustee will advise on an amount likely to be accepted by your creditors.

Licensed Insolvency Trustee fees in a consumer proposal

A Licensed Insolvency Trustee’s fees and counselling fees are paid from your consumer proposal. This fee is at no additional cost to you, and you won’t make any separate costs on top of this.

The Office of the Superintendent of Bankruptcy regulates the fee charged by a trustee. These fees are deducted from your monthly payments before creditors receive their payments.

In Canada, only a Licensed Insolvency Trustee can administer a consumer proposal.

Licensed Insolvency Trustees can stop collection calls, lift wage garnishments, end all legal action and freeze interest on debts.

Don’t pay to speak to a trustee or for someone to prepare your documents beforehand. Watch out for debt settlement companies that charge a fee to refer you to one.

Can you pay off a consumer proposal early?

There’s no minimum payment term, meaning you can pay off your consumer proposal anytime.

How consumer proposal payments work

If your consumer proposal is accepted, you’ll make consumer proposal payments directly to your Licensed Insolvency Trustee, who will distribute them to your creditors.

Payments are interest-free. Many people choose to make monthly installments, but you can also make lump-sum payments.

Once you finish these payments, you are debt free.

How long does a consumer proposal take?

Consumer proposal payments are paid over a maximum of five years. Your monthly payments will never change, even if there is a change in your income.

A consumer proposal can be spread over five years.

Paying over this timeframe means a low monthly payment, helping make your consumer proposal as affordable as possible.

Get a bespoke consumer proposal cost

Consumer proposal costs depend on your debts, the creditors involved, your income and your assets.

Your unsecured debt is restructured into one affordable monthly payment for up to five years.

You’ll know the exact cost of the consumer proposal before you file, and the amount you pay will never change. Once you complete your payments, your debts are eliminated.

For a tailored consumer proposal cost, arrange a free and confidential consultation today using our network of knowledgeable and experienced Licensed Insolvency Trustee firms.

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