How do I determine my payments in a consumer proposal?

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In Canada, a consumer proposal involves working with a Licensed Insolvency Trustee to create a payment plan based on your total debt and affordability. Payments are spread over 3 to 5 years and need to match what creditors would receive in bankruptcy. It’s all about finding a budget-friendly plan.

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Question

How much will I have to pay in a consumer proposal? It’s important for me to figure out what my financial commitment will be if I decide this is the right path. Knowing the payment expectations helps me budget accordingly. What should I anticipate paying?

From: Anonymous Question, Nova Scotia (NS)

Debt Insiders Answer

In Canada, figuring out how much you’ll pay with a consumer proposal boils down to two things: your total debt and what you can realistically afford. When you take this step, you’ll team up with a Licensed Insolvency Trustee (or LIT for short) to hash out a plan with your creditors. Typically, these payments are spread out over 3 to 5 years, and the total needs to be at least what your creditors would get if you opted for bankruptcy. So, expect to make monthly payments that can swing from a few hundred to a few thousand dollars, depending on your income and expenses. It’s all about budgeting in a way that fits your financial groove. The LIT will dive into your financial details to sort out the best plan for your situation.

From: Anonymous Question

Office of the Superintendent of Bankrupty (OSB) Answer

In a consumer proposal in Canada, your payments will generally be determined based on your ability to pay and the amount you owe to your creditors. You will propose a monthly payment amount that is manageable for you while ensuring it pays a reasonable return to your creditors over a maximum of five years, as outlined in the Bankruptcy and Insolvency Act, RSC 1985, c 11, section 66.

The payment must be sufficient to settle a portion of your debts, which includes any unpaid unsecured amounts. The Consumer Proposal Regulations, SOR/2007-256, section 9, specify that the payments will be a fixed sum over a timeline you set, subject to the approval of the creditors. Generally, this could range from a few hundred to several thousand dollars a month depending on your income and the total amount of debts.

If you have regular income and can afford to pay a higher amount, this will also influence the final proposal. Ultimately, you should work closely with a licensed insolvency trustee to calculate the total monthly payment you can commit to while budgeting for your other living expenses.

From: This answer is provided by scanning the OSB Bankruptcy & Insolvency Act and related directives

Related Questions

Here are the top 5 most frequently asked questions related to the cost and payments of a consumer proposal, based on common queries and concerns:

1. What are the total costs and fees associated with a consumer proposal?

• The costs include a filing fee of $104.24, administration fees of $1,500 plus 20% of creditor distributions, counselling fees of $170, and a 5% levy on creditor distributions.

2. How are the payments structured in a consumer proposal?

• Payments are typically fixed monthly installments, but can also include lump sum offers, stepped payments, or other negotiated terms, all of which must be completed within a maximum of 60 months.

3. Will I have to pay interest on my debt in a consumer proposal?

• No, interest charges on your debt freeze once the consumer proposal is filed, and you only pay the agreed-upon amount without any additional interest.

4. How much of my debt will I have to repay in a consumer proposal?

• The amount you repay must be more than what your creditors would receive if you filed for bankruptcy, and it must be affordable based on your income and financial situation.

5. Can I afford the monthly payments of a consumer proposal?

• Your Licensed Insolvency Trustee will help determine how much you can reasonably afford to pay each month, ensuring the payments are manageable based on your income and lifestyle.

References

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