Cost of a Consumer Proposal

As a process which can offer a positive alternative to personal bankruptcy, a consumer proposal is structured so that you will repay some, or all, of your debt through a formal settlement with your creditors. What you’ll pay — both to your creditors and in fees — varies based on your individual situation. Your MNP Licensed Insolvency Trustee will help set up a payment plan that works for you, as part of your life changing debt solution.

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Consumer Proposals 101: An Introduction

Consumer Proposals 101 - An Introduction

How are Consumer Proposal fees determined?

For a consumer proposal to be viable, your creditors will generally expect to receive more money than they would in a bankruptcy scenario. This usually means you need to be capable of monthly payments over an extended period of time which are sufficient to resolve your outstanding debts; although it may be possible to negotiate a proposal that requires you to pay a lump sum within some reasonable time frame.

Once you decide to move forward with a Consumer Proposal, your Licensed Insolvency Trustee will file notice with the Office of the Superintendent of Bankruptcy (OSB) — proposing new terms for your debts (e.g. lower interest rates, lower monthly payments, extended payment terms, etc.). At that moment, interest stops accumulating, you stop making payments on your outstanding balances and most wage garnishments will cease. Once a majority (by dollar value) of creditors accept the terms, all future debt payments will be made in monthly installments to your Licensed Insolvency Trustee or as set out in the proposal. He or she will then disburse those funds to your creditors.

The fees associated with your consumer proposal are federally regulated and are a percentage of the funds you pay into your proposal. From your first meeting until your proposal is paid off, you will never be billed directly for any services.

What does a Consumer Proposal cost?

Regardless of what you owe and how long the proposal is in process, you will never absorb any upfront costs from your Licensed Insolvency Trustee throughout the duration of your Consumer Proposal. The total cost to you will be equal to or lower than what you owe your creditors at the moment your Consumer Proposal is filed — less the accumulated interest and penalties that would have been incurred had you not entered a Consumer Proposal.

How will a Consumer Proposal impact my credit score?

The process of filing a Consumer Proposal is intended to help you settle your debts without the long-term consequences and relinquishing of assets associated with a personal bankruptcy. With that said, there will be some immediate impacts to your credit score which you should be aware of. These will affect your ability to borrow money for the first few years after your claim.

For three years after your final payment, a note will appear on your credit report indicating that you entered into an arrangement to settle your debts. This will make it more difficult to secure new loans, credit cards, and other forms of financing. It may cause lenders to require a co-sign to issue new debt or mean you will be charged higher interest rates if you do get approved.

There are things you can do during and after the filing of your proposal that will improve your credit score, even while you are still making payments into the proposal. Those will be explained to you during the two counselling sessions that are conducted as part of the consumer proposal process.

How Much Will a Consumer Proposal Cost?

Although a Consumer Proposal offers a positive alternative to bankruptcy, you are expected to repay at least a portion of your debt. As part of your Life-Changing Debt Solution, your MNP Licensed Insolvency Trustee will help you make an offer to your creditors, using affordable monthly payments on a timeline that works for you. Our fees are paid from the amount you’ve agreed to pay your creditors. There is no additional fee payable to MNP Ltd.

To have your Consumer Proposal accepted, it needs to be a better outcome for your creditors than if you were to file a bankruptcy. How much of your debt you’ll repay will depend in part on your income level and what assets you own.

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