Five things to know about the costs of a Consumer Proposal

If you’re struggling with unmanageable debt and worry you’ll never break the cycle of living from one bill to another, a Consumer Proposal may help you get the financial fresh start you deserve.

This is the fourth in a five-part blog series about what Consumer Proposals are, how the process works, and whether they might be the right solution for you to get permanent relief from your unsecured debt.

1. A Consumer Proposal is often the most affordable debt settlement option

A Consumer Proposal is based on your income and household finances, which ensures it is affordable for your current and anticipated future finances. The settlement amount is interest free, and often reduces the total amount you owe by half and sometimes up to 70 percent. However, the amount of your Consumer Proposal must be more than your creditors would receive if you were to file a Bankruptcy.

2. There is no upfront cost to file a Consumer Proposal

Fees for the Licensed Insolvency Trustee and Office of the Superintendent of Bankruptcy come directly from the settlement amount offered to your creditors. You do not have to pay any additional costs to file a Consumer Proposal at any point in the process. 

3. A Consumer Proposal protects your assets

Unlike a Bankruptcy, which requires you to surrender certain non-exempt property, a Consumer Proposal requires only monthly or lump sum payments toward your settlement amount. You can keep your house, car, jewelry, and any other property you wish to retain.

4. An increase in income or financial windfall will not impact your Consumer Proposal

The amount you pay in a Consumer Proposal will not increase if you receive a raise, GST rebate, income tax refund, inheritance, or financial windfall of any kind. You may choose to use these funds to pay down your Consumer Proposal faster, but you are by no means required to do so.

5. There are several payment options to fund your Consumer Proposal

You must pay your Consumer Proposal in full within a maximum of five years from the date it is accepted. You must also make the agreed payments on time and in full to avoid defaulting and having your Consumer Proposal annulled. Otherwise, you have considerable flexibility to make payments that fit your financial circumstances and goals:

• Monthly payments – a single consistent amount is paid to the Licensed Insolvency Trustee each month over the agreed period up to five years until the Proposal is repaid.
• Lump sum payment(s) – either a single payment or several payments of an agreed value over a maximum of five years for the total amount of the Proposal.
• Variable payments – a Proposal can be structured so you pay more at times when you expect your earnings to be greater, and less when you expect your earnings to less.
• Step up payments – if you expect your earnings to grow over the Proposal period, you can arrange to pay less initially and progressively more over time.
• Step down payments – if you expect your earnings to decrease over the Proposal period, you can arrange to pay more initially and progressively less over time.