To determine what your proposal will cost, your proposal administrator will first calculate the expected realizations in a bankruptcy.
Creditors will only accept a consumer proposal if you offer them more than what they would receive in a bankruptcy. For example, if by declaring bankruptcy you would lose your house with equity of $20,000, your creditors would not generally accept a $10,000 debt proposal. They would prefer that you go bankrupt, so that your house would be sold and they would get their share of the $20,000 proceeds. Similarly if you are required to pay $750 per month in surplus income payments in a bankruptcy for 21 months your creditors will expect to receive at least $16,000 in your proposal.
Your proposal administrator will review your expected bankruptcy payments then offer your creditors a greater amount, still based on your ability to pay. Proposals can result in debt repayment for as low as 30% of the original amount owing.
While the total amount you will pay will be more than you pay in a bankruptcy, your payment terms can be more flexible and this is one of the major advantages of filing a consumer proposal over declaring bankruptcy. If your agreement calls for the payment of $20,000 you can spread the cost of those payments over 2, 3 or even up to 5 years. If your circumstances change you can arrange to pay off your proposal earlier.
For a more indepth discussion, please see our blog article on How Much Will My Consumer Proposal Cost?
Are There Fees to File a Consumer Proposal?
There are no “up front”, “hidden” or “set” fees in a consumer proposal. All consumer proposal administrators are licensed by the federal government, and the government regulates their fees. In other words, every proposal administrator receives the same fee for the same proposal.
The good news is that the fees come out of your monthly payment, so it’s the creditors that are paying for the cost. If the creditors agree to a proposal of $400 per month, you only pay $400 per month.
Your administrator receives a fee of approximately 20% of the money that is paid to the creditors, but again, the most important fact is that the cost of the proposal is included in your monthly payment; there are no additional costs to you.
Compare Your Costs
In almost all situations, the monthly cost of your consumer proposal payments will be significantly less than your debt payments are today. Talk to a Consumer Proposal Administrator about your debts and what you can afford. Our appointments are always free and completely confidential. We can help you consolidate your debt and lower your monthly payments. Contact us today.