How Much Does a Consumer Proposal Cost?

Is your debt load getting to be too much for you to bear? Are you tired of being harrassed at home for debt payments there’s no way you’re able to make? A consumer proposal may just be the solution you’re looking for.

If you’re already struggling to pay bills, though, you may be wondering: “How much does a consumer proposal cost?” You might be surprised to learn that filing a consumer proposal will not cost you any upfront money. 

Let’s dive a little deeper into the costs associated with a consumer proposal and how, exactly, those costs get paid.

How Much Does a Consumer Proposal Cost?

Let’s get this out of the way … You will incur absolutely no upfront, hidden, or additional costs when filing a consumer proposal. None. That’s not to say there are no costs or fees associated with filing a consumer proposal. Just that you won’t be paying for them upfront, and there won’t be any surprise costs or fees in the future.

So, how do these costs and fees get paid? 

In a roundabout way, the people you owe money to will be paying the costs of the consumer proposal. Let’s take a look at how this works.

How Consumer Proposal Fees Get Paid?

A big factor in how your consumer proposal will be structured has to do with how much you can afford in monthly payments. After this has been decided, your Licenced Insolvency Trustee can help you negotiate a reduction in the amount owed to your creditors to meet these monthly payments.

Let’s look at an over-simplified example:

• Unsecured Debt that you Owe – $30,000
• Monthly Payment Due on that Unsecured Debt at 10% over 60 months – $631.07
• Realistic Monthly Payment you can Afford – $200

All of the costs and fees associated with a consumer proposal are paid out of the monthly payment that it has been determined that you can afford. If your creditors are only willing to negotiate a 30% reduction in the debt you owe, putting you above the $200 a month you can afford, they’ll have to lower the amount they’re willing to accept to meet this $200 a month limit. The concern a creditor may have is that if you file bankruptcy, they would receive less. As such creditors are generally willing to negotiate with consumers in a consumer proposal.

So, basically, all consumer proposal fees come out of your monthly consumer proposal payment first, and then after that, your creditors get paid. If your creditors want to get paid and want to avoid you filing bankruptcy, they must reduce the amount of money they’re willing to accept to meet a monthly payment you can afford.

In this case, to get to your $200 monthly limit, your creditors must reduce the monthly amount they’re willing to accept by more than 50% (these reductions are common). So, in essence, all of the consumer proposal fees come out of your monthly payment first. Then, your creditors will offset what they’re willing to accept to keep these payments at $200 a month. 

Costs and Fees Associated With Filing a Consumer Proposal

Let’s look at the costs associated with a consumer proposal. Remember, all of these costs come out of your monthly payments. None of them are upfront or in addition to the monthly payment. 

Additionally, you will never experience any other fees for a consumer proposal other than what’s listed below. The numbers below are rounded for ease of reading.

• Consultation Fee – At Powell Associates Ltd, there is no cost for your consumer proposal consultation. Not for the first meeting or any other meetings with regard to your consumer proposal.

• Filing Fee – A $100 consumer proposal filing fee must be paid to the Office of the Superintendent of Bankruptcy (OSB). This comes directly out of your agreed-upon monthly payment.

• Counselling Fees – Two mandatory credit counselling sessions are required by the OSB to file a consumer proposal. Each session costs $85. Again, this is paid out of your agreed-upon monthly payment. These sessions are designed to ensure that no more debt issues should arise during your consumer proposal or after it is discharged.

• Trustee Fees – The Licensed Insolvency Trustee’s fees include a $1,500 consumer proposal fee plus 20% of the amounts paid to creditors. All of these fees come out of the monthly payment and are basically paid by the creditors when they reduce the amount of money they’re willing to accept monthly.

• OSB Levy – A 5% levy of the amounts distributed to creditors is payable to the Superintendent of Bankruptcy (OSB). Again, this is included in your monthly payment.

After your consumer proposal is accepted, your Licenced Insolvency Trustee will handle everything. You pay them the agreed-upon monthly payment, and they distribute that money between all of the fees listed above. Whatever is left of your monthly payment will be used to pay off your unsecured debt.

How Long Will Consumer Proposal Payments Last?

After your consumer proposal is accepted, you will make monthly payments for a maximum of 60 months. Your monthly payments will never increase or decrease.

If your financial situation should improve during those 60 months, you can pay the remaining monthly payments in one lump sum, or by doubling up payments, without any penalties or additional fees.

Pros and Cons of Filing a Consumer Proposal

While a consumer proposal might sound too good to be true, there are some downsides you need to know about. Let’s check out the pros and cons of filing for a consumer proposal.

Consumer Proposal Pros

• Stops all collection efforts. No one will call or harass you again about your unsecured debt.

• Puts an end to wage garnishments. Whether you’re being threatened with wage garnishments or if your wages are already being garnished, once a consumer proposal is filed, all garnishments and legal actions stop with very few exceptions.

• All of your assets are safe. Consumer proposals offer asset protection. Your home, car(s), and financial assets are all safe.

• LITs handle everything for you. Your Licensed Insolvency Trustee handles everything, from helping you negotiate a reduction in your unsecured debt to paying your creditors every month. All at no out-of-pocket cost to you.

• Tax refunds are safe. All tax refunds and government benefits will remain untouched.

• No more interest payments. A consumer proposal wipes out all interest payments on all unsecured debt.

• One monthly payment. One low monthly payment pays off all unsecured debt.

• Monthly payment never changes. Unlike unsecured debts with compounded interest, you always know what your monthly payment will be.

• Credit score doesn’t matter. There is no minimum or maximum credit score to file a consumer proposal.

• Real debt reduction. Up to 80% of all unsecured debt could be wiped clean, depending on your situation.

Consumer Proposal Cons

• Only works with unsecured debt. This will include debts such as credit card debt, payday loans, personal loans, unpaid utility bills, unpaid rent, etc. Debts like mortgages, car loans, boat loans, etc will not be included unless you wish to surrender the underlying asset.

• Must include all unsecured debt. You can not pick and choose which unsecured debt you would like to include in a consumer proposal.

• Other debts not eligible. Debts like back child support, alimony payments, court-imposed fines, tickets, and school loans under seven years old are not included.

• Credit score will take a hit. A consumer proposal will be on your credit report for three years after you make your last consumer proposal payment or six years after the consumer proposal is filed (whichever comes first).

• Must owe a certain amount. In order to qualify for a consumer proposal, you must owe at least $1000 in unsecured debt that you’re unable to pay.

• Creditors could refuse to accept. Creditors agreeing to a consumer proposal isn’t guaranteed. At least 50% of your creditors, by dollar value, must agree to the consumer proposal in order for it to pass. While your consumer proposal is unlikely to be rejected, it is a possibility.

• Must be initiated by an LIT. Only a Licensed Insolvency Trustee can initiate a consumer proposal on your behalf. This cannot be filed on your own.

We Hope We’ve Answered “How Much Does a Consumer Proposal Cost?” for You

If you have any other questions about a consumer proposal or are ready to sit down and talk, feel free to contact us. There is no cost for a consumer proposal consultation. And, in a very short amount of time, all of your stress and worry about your unsecured debt could be a thing of the past.