If you’re drowning in debt and wondering whether a consumer proposal could give you breathing room, the first question on your mind is probably: how much are consumer proposal payments? The honest answer is that it depends on your specific situation — but the good news is that payments are designed to be affordable, and most people end up paying far less than what they originally owed.
A consumer proposal is one of the most popular debt relief options in Canada for a reason. It lets you settle your unsecured debt for a fraction of the total, with fixed monthly payments and zero interest. Below, we’ll walk you through exactly how those payments are calculated, what a realistic example looks like, and what you can expect to pay each month.
What Is a Consumer Proposal?
A consumer proposal is a legally binding agreement between you and your creditors, filed through a Licensed Insolvency Trustee (LIT). It’s governed by the Bankruptcy and Insolvency Act and administered under the oversight of the Office of the Superintendent of Bankruptcy Canada. In a consumer proposal, you offer to repay a portion of your unsecured debt — typically between 20% and 50% — through fixed monthly payments over a maximum of five years.
Unlike bankruptcy, a consumer proposal lets you keep your assets, including your home and car. Once your creditors accept the proposal, all interest charges stop, and collection calls and wage garnishments must cease. It’s a structured, predictable path to becoming debt-free without the stigma or consequences of going bankrupt.
Consumer proposals are available to Canadians who owe less than $250,000 in unsecured debt (not including your mortgage). If you owe more, a Division I proposal may be an option — but for most people dealing with credit card debt, personal loans, or tax debt, the standard consumer proposal is the right fit. You can learn more about how consumer proposals compare with other options in our guide to consumer debt relief strategies.
How Consumer Proposal Payments Are Calculated
There’s no single formula that spits out a monthly number. Your Licensed Insolvency Trustee considers several factors to arrive at a payment that creditors will accept while still being manageable for you.
Your Total Unsecured Debt
The more you owe, the higher the total proposal amount tends to be — but the percentage you repay often goes down as debt increases. Someone who owes $30,000 might repay 35% to 45%, while someone who owes $80,000 might negotiate a repayment of 25% to 35%. The key is that creditors need to receive more through the proposal than they would if you filed for bankruptcy.
Your Monthly Income and Expenses
Your LIT will review your household budget carefully. The goal is to find a payment amount that you can realistically sustain for up to 60 months. Essential expenses like rent, groceries, transportation, and childcare are factored in. If your budget is tight, a lower payment with a longer term may be proposed.
Your Assets and Equity
Creditors expect to receive at least as much as they would get if you went bankrupt. If you have significant equity in a home or vehicle, your proposal offer needs to reflect that. For instance, if bankruptcy would mean surrendering $15,000 in assets to creditors, your consumer proposal needs to offer at least that much — plus a bit more to make it worth their while.
Surplus Income Rules
In bankruptcy, if you earn above certain government-set thresholds, you’re required to make surplus income payments. Your LIT uses these same thresholds as a benchmark when structuring your proposal. If your income generates significant surplus, your proposal payments will likely be higher — but still less than what bankruptcy surplus payments would cost over time. According to Farber Debt Solutions, this surplus income calculation is one of the most important factors in determining your monthly amount.
What About LIT Fees?
Here’s something that surprises many people: you don’t pay your Licensed Insolvency Trustee separately. LIT fees are set by federal regulation — a base fee of $1,500 plus 20% of the distributions paid to creditors — and these fees come out of the payments you’re already making. There is no upfront cost to you, and the fee is the same regardless of which trustee you choose. As CollectorHQ explains, LIT fees are locked by law, so no trustee can charge you more or less than the regulated amount.
Pros and Cons of Consumer Proposal Payments
Who Should Consider a Consumer Proposal?
- You owe between $10,000 and $250,000 in unsecured debt and can’t realistically pay it off
- You have a steady income but your minimum payments are unmanageable
- You want to keep your home, car, and other assets
- You want to avoid bankruptcy and its more severe credit consequences
- You’re dealing with creditor calls, wage garnishments, or legal threats
- Your debt is small enough that a debt consolidation loan or credit counselling program could solve the problem
- You have no income at all and can’t make any monthly payment
- Most of your debt is secured (mortgage, car loan) and wouldn’t be included anyway
- You owe more than $250,000 in unsecured debt (you may need a Division I proposal instead)
Real-World Payment Example
Let’s look at what consumer proposal payments might actually look like for a typical Canadian in debt. Keep in mind that every situation is different — this is an illustration, not a guarantee.
In this scenario, instead of struggling with $40,000 in debt plus ongoing interest charges, you’d make a single fixed payment of $200 per month for five years. At the end, the remaining $28,000 is legally forgiven. Compare that to minimum payments on credit cards, where you could spend 20+ years paying and end up spending far more than the original balance in interest alone.
For a higher-income household, the numbers shift. Someone earning more with the same $40,000 debt might be asked to pay 40% to 50%, bringing monthly payments closer to $350 to $400. Your LIT will work with you to find the right balance. You can read real consumer proposal success stories to see how others navigated similar situations.
Steps to Start a Consumer Proposal
- Book a free consultation with a Licensed Insolvency Trustee. This initial meeting costs nothing. The LIT will review your debts, income, assets, and expenses to determine if a consumer proposal makes sense for your situation.
- Get your financial picture together. Gather recent pay stubs, tax returns, a list of all debts, and a breakdown of your monthly expenses. The more complete your information, the faster the process moves.
- Your LIT drafts the proposal. Based on your financial situation, the LIT calculates an offer that creditors are likely to accept. They’ll explain the proposed monthly payment and term length before filing anything.
- The proposal is filed and creditors vote. Once filed, you’re immediately protected from creditor actions. Creditors have 45 days to vote. The proposal is accepted if a majority (by dollar value of claims) votes in favour — and most proposals are accepted on the first attempt.
- You make your fixed monthly payments. Payments go directly to your LIT, who distributes the funds to creditors. You’ll also complete two financial counselling sessions, which are included at no extra cost.
- Complete the proposal and get your certificate. Once all payments and counselling sessions are done, you receive a Certificate of Full Performance. Your remaining debt is legally discharged, and your path to rebuilding your financial life begins.
Ready to find out what your consumer proposal payments could look like?
How much are consumer proposal payments per month?
Most Canadians pay between $200 and $500 per month in a consumer proposal, though the exact amount depends on your income, total debt, assets, and what your creditors will accept. Payments are fixed for the entire term — they won’t go up even if your income increases. Your Licensed Insolvency Trustee will calculate a monthly amount that balances what creditors expect with what you can realistically afford.
Do I have to pay my LIT separately for a consumer proposal?
No. Licensed Insolvency Trustee fees are regulated by the federal government and are included in the payments you already make. The standard fee is a $1,500 base plus 20% of what gets distributed to creditors. You don’t pay anything upfront and the fee is identical no matter which LIT you work with. There are no hidden charges or surprise costs.
Can I pay off my consumer proposal early?
Yes, you can pay off your consumer proposal in a lump sum or make extra payments at any time without penalty. Paying early won’t reduce the total amount you owe under the proposal, but it will shorten the term — meaning you complete the process sooner and the R7 notation on your credit report starts its countdown earlier. Many people who receive a tax refund or bonus use it to accelerate their proposal.
What happens if I miss a consumer proposal payment?
If you miss payments, your LIT will reach out to help you catch up. However, if you fall three months behind (three missed payments), your proposal is automatically annulled. At that point, the full original debt is reinstated and creditors can resume collection actions. If you’re struggling, talk to your LIT before missing payments — they can sometimes help restructure the terms to keep you on track.
Is a consumer proposal better than bankruptcy for keeping costs low?
In many cases, yes. While a consumer proposal may cost slightly more in total dollars than a first-time bankruptcy, you keep your assets, avoid surplus income requirements that can extend bankruptcy, and have more predictable payments. Bankruptcy can also last longer if you have high income, and it carries a more severe credit impact (R9 rating vs. R7 for a proposal). For a detailed comparison, see our guide to bankruptcy vs. consumer proposals in Canada.
After 20 years of structuring multi-million dollar corporate debt facilities and corporate turnarounds in investment banking, Marcus now leads Canadian Debt Relief to apply those exact same balance-sheet optimization frameworks to Canadian household debt.
