A Consumer Proposal is a legally binding agreement between you and the people you owe (your creditors) to repay your unaffordable debt through a series of manageable monthly payments.
It can be a useful method of helping you deal with your debt and regain control of your finances, but how much you’ll repay throughout your arrangement depends on your individual circumstances.
This guide will cover everything you need to know about how much a Consumer Proposal costs, from how much your monthly payments are likely to be to how to negotiate better fees. Familiarizing yourself with this information can help you determine if it’s the right solution for you.
Consumer Proposals must be authorized and managed by a Licensed Insolvency Trustee (LIT). Licensed Insolvency Trustees (LITs) are federally regulated financial professionals whose main responsibility is to review your financial situation and determine how much of your debt you can comfortably afford to repay each month.
During a Consumer Proposal, your creditors won’t be able to contact you about the debt or take legal action against you and all interest and charges will be frozen, allowing you to focus on repaying what you owe at a pace that suits you.
There is a minimum debt level of $1,000 and a maximum of $250,000 ($500,000 for couples) required for a Consumer Proposal. If your debts fall outside of this threshold, your LIT will suggest an alternative solution that’s better suited to your financial situation.
The purpose of this meeting is to help the LIT gain a complete overview of your finances, including your income, debts, assets, and expenses, so they can calculate a reasonable repayment amount.
Consumer Proposals must include all unsecured debts. In other words, you can’t pick and choose which debts or creditors you want to include in your proposal.
If the majority of your creditors by debt value vote in agreement with your proposal, it will be officially accepted and all of your creditors (including any that rejected it) will be legally bound to it for the duration of your payment plan.
During your Consumer Proposal, you’ll be expected to attend two credit counselling sessions on how to better manage your finances and avoid further debt. This is a mandatory step and will determine whether you’re discharged from your arrangement on the expected date.
This is because any fees paid to your LIT will come directly from your monthly repayment amount. This means that you won’t have to pay anything on top of how much you originally borrowed and the amount outlined in your proposal will be the same amount you repay.
Put simply, your creditors will essentially cover the cost of filing a Consumer Proposal by accepting less than what they are originally owed. These fees will be clearly outlined by your LIT before you file and you should never be surprised by any additional fees at any point during your arrangement.
For example, if your arrangement lasts the standard five years, your fees will come out of your monthly payments and will be spread out over this period. This essentially means that, while you’ll pay the same amount each month, the amount your creditors receive will differ depending on the fees required.
Remember, your LIT will take your income and expenses into account when calculating your monthly payment amount. This means that you should always be able to afford your payment plan alongside your existing financial obligations, such as your rent and bills.
The higher the monthly payment you suggest, the more likely your creditors are to accept your proposal. However, you must never suggest an amount you know you won’t be able to maintain as this can lead to your arrangement failing, which can have a disastrous impact on your finances.
Consumer Proposals can also be paid off in lump sum payments instead of monthly payments. This is when an individual has a third party (e.g. family member) who is willing to contribute some money to help you settle your debt.
The only time your fixed monthly payment amount will change is if your income changes to a point where you can no longer afford your payments as they were originally set (e.g. if your income is reduced or you lose your job).
If this happens, it’s important to talk to your LIT as soon as possible to discuss a possible amendment to your current repayments. They will discuss all your available options and help you determine your next steps – you may need to provide documentation to prove that your financial situation has changed.
The good news is, any fees required to be paid to your LIT will come directly from your monthly Consumer Proposal payment. This means that you’ll never be asked to make any unexpected payments at any point during your arrangement and your repayment amount will be clearly outlined before you make your first payment.
It can be a useful method of helping you deal with your debt and regain control of your finances, but how much you’ll repay throughout your arrangement depends on your individual circumstances.
This guide will cover everything you need to know about how much a Consumer Proposal costs, from how much your monthly payments are likely to be to how to negotiate better fees. Familiarizing yourself with this information can help you determine if it’s the right solution for you.
What is a Consumer Proposal?
A Consumer Proposal is a formal debt solution that allows you to repay your unsecured debt through a series of smaller, more manageable monthly payments. It is governed by the Bankruptcy and Insolvency Act (BIA), which is a piece of legislation that exists to help you know how to deal with your unaffordable debt.Consumer Proposals must be authorized and managed by a Licensed Insolvency Trustee (LIT). Licensed Insolvency Trustees (LITs) are federally regulated financial professionals whose main responsibility is to review your financial situation and determine how much of your debt you can comfortably afford to repay each month.
During a Consumer Proposal, your creditors won’t be able to contact you about the debt or take legal action against you and all interest and charges will be frozen, allowing you to focus on repaying what you owe at a pace that suits you.
There is a minimum debt level of $1,000 and a maximum of $250,000 ($500,000 for couples) required for a Consumer Proposal. If your debts fall outside of this threshold, your LIT will suggest an alternative solution that’s better suited to your financial situation.
How does a Consumer Proposal work?
The Consumer Proposal journey usually follows a similar process, regardless of your financial circumstances. We’ve outlined the main steps you’ll be required to follow below:Meet with a LIT
The first thing you must do is meet with a LIT. They will review all your available options and let you know which solution they believe would be best suited to your financial situation, whether that’s a Consumer Proposal or something else.The purpose of this meeting is to help the LIT gain a complete overview of your finances, including your income, debts, assets, and expenses, so they can calculate a reasonable repayment amount.
Prepare your proposal
If your LIT determines that a Consumer Proposal would suit your financial situation, they will work with you to prepare your proposal. They will take various aspects of your financial situation into account and, in most cases, will give you as much flexibility as possible.Consumer Proposals must include all unsecured debts. In other words, you can’t pick and choose which debts or creditors you want to include in your proposal.
Wait for a decision
Once your LIT has drafted your proposal, they will submit it to the court and send each of your creditors a copy. They will then have 45 days from this date to review your proposal and either accept or reject the suggested terms.If the majority of your creditors by debt value vote in agreement with your proposal, it will be officially accepted and all of your creditors (including any that rejected it) will be legally bound to it for the duration of your payment plan.
Complete your arrangement
Once the paperwork has been filed, you will make your first monthly proposal payment. These payments will last anywhere from sixty days to five years depending on what was originally agreed with your LIT.During your Consumer Proposal, you’ll be expected to attend two credit counselling sessions on how to better manage your finances and avoid further debt. This is a mandatory step and will determine whether you’re discharged from your arrangement on the expected date.
How much does a Consumer Proposal cost?
One of the main questions people have when researching a particular debt solution is how much it will cost them to apply on top of their monthly payments. However, Consumer Proposals are one of the most cost-effective and flexible debt solutions as they incur no extra fees.This is because any fees paid to your LIT will come directly from your monthly repayment amount. This means that you won’t have to pay anything on top of how much you originally borrowed and the amount outlined in your proposal will be the same amount you repay.
Put simply, your creditors will essentially cover the cost of filing a Consumer Proposal by accepting less than what they are originally owed. These fees will be clearly outlined by your LIT before you file and you should never be surprised by any additional fees at any point during your arrangement.
How are Consumer Proposal fees determined?
The important thing to know about Consumer Proposal fees is that your LIT will always discuss them with you before you file. As a result, you should never be taken aback by any hidden or upfront payments.For example, if your arrangement lasts the standard five years, your fees will come out of your monthly payments and will be spread out over this period. This essentially means that, while you’ll pay the same amount each month, the amount your creditors receive will differ depending on the fees required.
Can you negotiate Consumer Proposal fees?
Consumer Proposal payments are usually the result of negotiations between you and your creditors, with your LIT acting as the middle-man to finalize a payment plan that all parties are happy with.Remember, your LIT will take your income and expenses into account when calculating your monthly payment amount. This means that you should always be able to afford your payment plan alongside your existing financial obligations, such as your rent and bills.
The higher the monthly payment you suggest, the more likely your creditors are to accept your proposal. However, you must never suggest an amount you know you won’t be able to maintain as this can lead to your arrangement failing, which can have a disastrous impact on your finances.
Consumer Proposals can also be paid off in lump sum payments instead of monthly payments. This is when an individual has a third party (e.g. family member) who is willing to contribute some money to help you settle your debt.
What if your financial circumstances change during a Consumer Proposal?
Consumer Proposals typically last five years, so it’s normal for your financial circumstances to change for the better or the worse during this time. However, once your monthly payments have been finalized, they will be fixed for the duration of your arrangement – even if your income increases.The only time your fixed monthly payment amount will change is if your income changes to a point where you can no longer afford your payments as they were originally set (e.g. if your income is reduced or you lose your job).
If this happens, it’s important to talk to your LIT as soon as possible to discuss a possible amendment to your current repayments. They will discuss all your available options and help you determine your next steps – you may need to provide documentation to prove that your financial situation has changed.
What are alternative solutions to a Consumer Proposal?
A Consumer Proposal is a popular solution that can help you deal with your unaffordable debt, but it isn’t the only option available. Here are some of the most common alternatives:Debt consolidation
Debt consolidation, or a debt consolidation loan, is a method of combining your monthly debt payments into a single monthly payment. One of the main advantages of debt consolidation is that it also allows you to combine all your interest payments, reducing the overall amount you pay back.Debt Management Plan (DMP)
A Debt Management Plan (DMP) is an informal solution where you make smaller, more manageable payments towards what you owe. Because it isn’t legally binding, your creditors aren’t bound to it and are not legally obliged to stick to the terms outlined in the original proposal.Bankruptcy
Bankruptcy is a legal process that gives you temporary relief from your debts before writing them off. This can give you a fresh financial start but you’ll usually be required to surrender your assets to repay your creditors.Conclusion
A Consumer Proposal is a legally binding agreement between you and your creditors to repay your debt in a way that’s more manageable and affordable for you. Familiarizing yourself with the cost of a Consumer Proposal can help you know what to expect before you start your arrangement.The good news is, any fees required to be paid to your LIT will come directly from your monthly Consumer Proposal payment. This means that you’ll never be asked to make any unexpected payments at any point during your arrangement and your repayment amount will be clearly outlined before you make your first payment.
Key Takeaways
- A Consumer Proposal will be based on your income and expenses, meaning you’ll never be asked to pay more than you can afford
- Any additional costs (e.g. to your LIT) will come directly from your monthly payments
- It’s important to suggest an amount you can comfortably afford when negotiating your Consumer Proposal
- If your income decreases and you can no longer afford your payments, your LIT may be able to alter your payments
- If a Consumer Proposal isn’t right for you, you may be better suited to debt consolidation, a Debt Management Plan (DMP), or bankruptcy