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How much does a Consumer Proposal cost?

A consumer proposal is a formal debt settlement option available to individuals in Canada who are struggling with overwhelming debt. It is a legally binding process governed by the Bankruptcy and Insolvency Act (BIA). A consumer proposal is an alternative to filing for bankruptcy and provides a way for individuals to negotiate with their creditors to repay a portion of their debts over an extended period of time.

Here are some key features and steps involved in a consumer proposal:

  1. Licensed Insolvency Trustee (LIT): To initiate a consumer proposal, you need to work with a Licensed Insolvency Trustee (LIT). LITs are professionals authorized by the government to administer bankruptcy and consumer proposal processes.
  2. Proposal Development: The LIT will help you assess your financial situation, determine an affordable repayment plan, and develop a formal proposal to present to your creditors.
  3. Proposal Submission: The LIT will file the consumer proposal with the Office of the Superintendent of Bankruptcy (OSB) and provide a copy to your creditors. The proposal will outline the amount you can afford to pay and the proposed repayment terms.
  4. Creditor Consideration: Your creditors will have 45 days to review the proposal and vote on whether to accept or reject it. For the proposal to be approved, it must receive support from the majority of your creditors based on the amount of debt owed.
  5. Repayment Terms: If the proposal is accepted, you will make consolidated monthly payments to the LIT, who will distribute the funds to your creditors based on the agreed-upon terms.
  6. Debt Settlement: Once you successfully complete the repayment plan, you will be considered legally released from the debts included in the proposal, provided you meet all the obligations outlined in the agreement.

A consumer proposal offers several advantages, such as stopping collection calls, protecting your assets, and providing a more flexible and manageable repayment plan compared to bankruptcy. However, it is essential to consult with a Licensed Insolvency Trustee to assess your specific financial situation and determine if a consumer proposal is the right option for you.

The cost of a consumer proposal can vary depending on various factors, including the complexity of your financial situation and the amount of debt involved. However, it’s important to note that the fees associated with a consumer proposal are regulated by the government, and they are generally affordable compared to other debt relief options.

The fees for a consumer proposal are typically determined based on a percentage of the total amount of debt being included in the proposal. The exact percentage may vary, but it is set by the Office of the Superintendent of Bankruptcy (OSB) and is generally around 20% of the debt amount.

For example, if your total debt included in the proposal is $20,000, the fees payable to the Licensed Insolvency Trustee (LIT) would be approximately $4,000 (20% of $20,000). This fee is distributed from the payments you make into the proposal over the course of your repayment plan.

It’s worth noting that the fees are included in the overall proposal and are not paid separately or upfront. The LIT will disclose the full details of the fees and how they will be distributed before you proceed with the consumer proposal.

To get an accurate understanding of the specific costs associated with a consumer proposal in your situation, it is advisable to consult directly with a Licensed Insolvency Trustee. They can provide you with personalized information based on your financial circumstances and the amount of debt you need to address.

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