Understanding How Much a Consumer Proposal Costs

What is a Consumer Proposal?

A consumer proposal is a formal agreement between you and your creditors to reduce your unsecured debt and establish a manageable repayment plan. Unlike bankruptcy, a consumer proposal allows you to keep your assets and usually results in paying back only a portion of your total debt over a set period.

How Much Does a Consumer Proposal Cost?

The cost of a consumer proposal can be influenced by several factors. It’s essential to understand these costs to make an informed decision.

Upfront Fees

Typically, there are no upfront fees when you file a consumer proposal. A Licensed Insolvency Trustee (LIT) will manage the process, and their fees are approved and regulated by the government. These fees are usually included in the monthly payments you make towards the proposal.

Monthly Payments

Your monthly payment in a consumer proposal is determined by your debt amount, income, and assets. The goal is to create a repayment plan that is both reasonable and manageable for you. On average, a consumer proposal might reduce your debt by up to 70%, with the remaining balance spread across a period of up to five years.

Trustee Fees

The Licensed Insolvency Trustee’s fees are built into your consumer proposal payments. This means you won’t have to pay them separately. The cost structure is regulated, ensuring transparency and fairness. Trustee fees are typically a percentage of the total amount repaid to creditors, often ranging from 20% to 25% of the total amount you pay through the proposal.

Additional Costs

There are usually minimal additional costs associated with a consumer proposal. However, if you choose to end the proposal early by paying off your agreed amount sooner, you can avoid some interest payments. Ensuring timely payments also helps you avoid any penalties or additional fees.

Is a Consumer Proposal Right for You?

Understanding how much a consumer proposal costs is crucial in deciding if it’s the right option for you. It’s a popular choice for Canadians struggling with unsecured debt due to its structured and regulated nature, along with the ability to keep assets and reduce overall debt.

If you’re overwhelmed by debt and considering your options, consulting with a Licensed Insolvency Trustee can provide personalized advice and help you navigate the best debt management solution for your situation.

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