Advantages of a Consumer Proposal in Canada | Spergel (2024)

A consumer proposal is a legal form of debt settlement that can reduce your debt by up to 80%. If you are considering a consumer proposal, you likely want to know exactly what reduction you will see in your debt, and the cost of a consumer proposal. Filed by a Licensed Insolvency Trustee and backed by the Bankruptcy and Insolvency Act, the cost of a consumer proposal is very much dependent on your unique financial circ*mstances.

Consumer proposal cost: how much can you save with a consumer proposal?

In order for a consumer proposal to be successful, the cost must work for both the debtor and the associated creditors. For debtors to have a successful consumer proposal, the payments must be reasonable and manageable. For creditors to accept, they will need to receive more than they would otherwise via a bankruptcy. At Spergel, we have been helping Canadians to file consumer proposals for years. With a 99% acceptance rate on any consumer proposals we file, we see many Canadians reducing their debt by up to 80% with a consumer proposal. This means that when you file with Spergel, you have a 99% chance of reducing your debt by 80%. As well as reducing your overall debt, consumer proposals enable you to keep your assets, avoid bankruptcy, and receive protection from your creditors via a stay of proceedings. Learn more about the advantages of filing a consumer proposal.

Consumer proposal cost: how much do you pay in a consumer proposal?

The true cost of a consumer proposal in Canada is dependent on a few key factors:

  • Your income, and any surplus income you would pay in a bankruptcy;
  • Any assets you have that would be surrendered in a bankruptcy; and
  • The creditors you owe, and the potential outcome they will expect from a consumer proposal

Once all of these factors are taken into consideration, your Licensed Insolvency Trustee will look into what you can reasonably afford to pay your creditors. What you pay is ultimately based on the negotiations you and your Licensed Insolvency Trustee can achieve with your creditors. Although every consumer proposal is different, they can often reduce your repayments to as low as 20% of the original amount of debt owed. As consumer proposals can last for up to five years, you can spread out your payments across this period to make them even more affordable. Creditors are likely to be in favour of this also as they may earn more over time. Every situation is different, and at Spergel we walk you through each step of the consumer proposal journey. Unlike other bankruptcy firms, you are assigned your very own Licensed Insolvency Trustee to walk you through the entire end to end process, instead of being passed from person to person. Book a free consultation with Spergel today, and we will calculate a payment plan for you to get started.

Do you pay fees for a consumer proposal?

There are no additional fees for a Licensed Insolvency Trustee on top of your consumer proposal month payments. Fees come out of your already negotiated consumer proposal payments, and creditors essentially fund the administration of the consumer proposal. Your monthly payments are final, with no adjustments, interest, or fees added on top.

How might an example consumer proposal look?

Say, for instance, you owe $50,000 in unsecured debt. It is possible that you and your Licensed Insolvency Trustee might be able to negotiate a settlement that is as low as $10,000 – a huge reduction of 80%. If you choose to repay this amount over the full term of a consumer proposal (60 months or 5 years), your monthly consumer proposal payment would be a fixed $167. Take a look at our other consumer proposal examples, and try using our consumer proposal calculator to see how your payments might look based on the amount of debt that you owe.

How are consumer proposal payments negotiated?

Consumer proposal payments are negotiated by your Licensed Insolvency on your behalf, and your creditors. Your Licensed Insolvency Trustee will review your financial circ*mstances and budget, and recommend an affordable amount to propose to your creditors. They will help to strike the balance between affordability for you, and an amount that your creditors are likely to accept. Your consumer proposal can be paid over a period of up to 5 years, and all payments are interest free. You also have the option to make lump sum payments on your consumer proposal, and you can pay it off early if you wish.

What if your financial circ*mstances change during a consumer proposal?

If you know your income is likely to increase before filing a consumer proposal, you might want to adjust your repayment plan accordingly so that you can finish your proposal sooner. You might wish to pay less for the first part of the consumer proposal, and increase the payments later once you have greater income. If, on the other hand, your financial circ*mstances deteriorate, you are only able to defer two payments during a consumer proposal. If you miss any more than two, your consumer proposal will fail. If your consumer proposal fails, your total debt will return. It also means that your creditors can restart collection calls and threaten legal action like a wage garnishment. If you suspect you will miss a third payment, you should speak to your Licensed Insolvency Trustee immediately. They can help you before your consumer proposal fails. They can try to negotiate with your creditors, and file revised payment terms. If your creditors accept this revised consumer proposal, you can continue with these new terms until your proposal is completed.

How can a consumer proposal improve your finances?

Although initially filing a consumer proposal can seem like an arduous task, it can certainly have a positive impact on your future. As well as substantially reducing your debt, it reduces your monthly debt payments overall, and means you can begin to save money. Although you have likely faced an initial impact on your credit score, as soon as you file a consumer proposal, you can begin to rebuild your credit score. When you are a few months into your consumer proposal, you can apply for a secured credit card. This is the quickest way for banks to regain confidence in you, if you are able to make consistent payments on time. Eventually, this will allow your credit score to rise even while you are in your consumer proposal. Learn more about life after a consumer proposal.

How does a Licensed Insolvency Trustee get paid from a consumer proposal?

You may think that filing a consumer proposal is a way for Licensed Insolvency Trustees to charge you fees, although this is far from the reality. The cost of administering your consumer proposal is actually factored into your agreed monthly payments. No additional costs are charged as part of the consumer proposal fee – everything is included in the amount you negotiate with your creditors. Any fees paid to a Licensed Insolvency Trustee are set by the Canadian government, and come from the monthly payment. This amount over time includes:

  • An administration fee of $100, paid to the Office of the Superintendent of Bankruptcy
  • The fees for two mandatory credit counselling sessions, at $85 each
  • Consumer proposal fees to the Licensed Insolvency Trustee of $1,500 plus 20% of creditor distributions
  • A 5% levy of creditor distributions, paid to the Office of the Superintendent of Bankruptcy

Once these fees have been paid from your monthly consumer proposal payments, any creditors who have claimed a stake in your consumer proposal will then receive their share of the balance. Instead of you having to pay Licensed Insolvency Trustees on top, your creditors essentially cover the cost of a consumer proposal for you. At Spergel, you do not make any payments until your consumer proposal has been officially filed. We do not charge any additional fees. We also offer flexible payments that help make your life easier when it comes to managing your finances. If you are considering filing bankruptcy, you can compare the cost of a consumer proposal with the cost of filing bankruptcy.

Discover how to file a consumer proposal

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If you want to know ‘how much does a consumer proposal cost?’, at Spergel, our team of Licensed Insolvency Trustees understands that each and every situation is unique. We provide bespoke debt relief solutions for our clients, and have a 99% acceptance rate on any consumer proposals we file. We understand exactly what creditors are looking for, and we know what debtors need. Book a free consultation today.

Eli’s Path to Debt Freedom

After cashing out an RRSP to pay for his wedding. Eli received an unexpected tax bill. With his other debts he could not afford to pay and eventually the debt grew. CRA decided to initiate a wage garnishment. We helped Eli avoid bankruptcy with a Consumer Proposal. Debt consolidation saved Eli’s pay cheque and his Consumer Proposal taught him to plan for unexpected expenses in the future.

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Advantages of a Consumer Proposal in Canada | Spergel (2024)


Advantages of a Consumer Proposal in Canada | Spergel? ›

Creditor protection: Once your LIT has filed your proposal, they will send a copy to your creditors, informing them about it. This will put you into consumer protection – also referred to as “stay of proceedings” – meaning your creditors must cease all collection or legal activities against you.

What happens when you file a consumer proposal in Canada? ›

Creditor protection: Once your LIT has filed your proposal, they will send a copy to your creditors, informing them about it. This will put you into consumer protection – also referred to as “stay of proceedings” – meaning your creditors must cease all collection or legal activities against you.

What is the downside of a consumer proposal? ›

Disadvantages of a Consumer Proposal:

A proposal will usually take longer to complete than a bankruptcy. Lowering your monthly payment means longer time paying back, however, if your situation improves, you CAN pay off a proposal early. Credit rating is still affected – A Consumer Proposal DOES affect your credit.

What is the success rate of a consumer proposal? ›

With a 99% acceptance rate on any consumer proposals we file, we see many Canadians reducing their debt by up to 80% with a consumer proposal. This means that when you file with Spergel, you have a 99% chance of reducing your debt by 80%.

How many times can you do a consumer proposal in Canada? ›

Whether you're filing for bankruptcy or a consumer proposal, there is legally no limit to the number of times you can do so in your lifetime. You will still need to meet the eligibility criteria to file, meaning you must be insolvent and owe more than $1000.

Will my credit score go up after a consumer proposal in Canada? ›

Is the Effect Of Consumer Proposal on My Credit, Permanent? Although there is no way to shorten the length of time your proposal affects your credit rating, you can still improve your credit score significantly with careful use of new credit within 2-3 years after completion of your consumer proposal.

How soon after a consumer proposal can I get a mortgage in Canada? ›

Because of this, generally speaking, conventional lenders in Canada will be unlikely to approve a mortgage application unless you have at least two years' clean credit history following completion of your consumer proposal.

What are the disadvantages to a consumer proposal Canada? ›

Cons of a Consumer Proposal
  • If the majority of your creditors vote against the Proposal, you may have to file for Bankruptcy.
  • It typically takes four to five years to repay a Consumer Proposal, which is longer than a typical Bankruptcy.
  • Your payments are fixed.

Is it smart to do a consumer proposal? ›

A consumer proposal filing makes good sense if you have a large amount of unsecured debt and a stable monthly income. If you can still repay at least 25% of your total debt over a five-year period, it's likely that creditors will accept a consumer proposal to avoid losing the entire loan balance in a bankruptcy.

Is doing a consumer proposal worth it? ›

Consumer proposals can provide significant benefits in managing overwhelming debt, making them worth considering. Here are key reasons to explore a consumer proposal: Debt Relief: Consumer proposals offer a structured way to regain control of your finances, preventing debt from snowballing with fees and penalties.

Do creditors usually accept consumer proposal? ›

Consumer proposals are usually accepted as filed and negotiations can take place between you and your creditors with the help of your Licensed Insolvency Trustee to gain a positive vote.

How badly does a consumer proposal affect your credit? ›

A consumer proposal will affect your credit rating, but less drastically than a Bankruptcy. While both options make it less likely that you will be able to obtain credit a Consumer Proposal will only stay on your record for three years after your last payment.

How long does it take to build credit after a consumer proposal? ›

After paying off debt you consolidated in a Consumer Proposal, or having your debt forgiven under personal bankruptcy, you can get a new mortgage, vehicle financing, credit card, bank loan, etc. In as little as two to three years you may even have a better credit rating than before you started!

What is the maximum debt level for a consumer proposal? ›

Debt Required to File a Consumer Proposal

To file a consumer proposal, which is a debt option more drastic than debt settlement but only slightly better than bankruptcy, you must owe at least $1,000 in unsecured debt. The maximum that you can owe as a single person and still qualify for a consumer proposal is $250,000.

How much can a consumer proposal reduce your debt? ›

A Consumer Proposal allows you to make a legal arrangement with your creditors wherein you'll only have to repay a portion of your debts – in full settlement – with no interest, fees or additional penalties. In fact, it's not uncommon for debts to be reduced by 70-80%!

Can I get a mortgage with a consumer proposal Canada? ›

A Consumer Proposal shouldn't hinder your ability to secure a new mortgage, even if you still have an existing one to pay off.

Is consumer proposal legal in Canada? ›

A consumer proposal is a formal, legally binding process that is administered by a Licensed Insolvency Trustee (LIT).

How long does consumer proposal stay on credit report Canada? ›

The consumer proposal and all accounts reported as satisfied through the proposal will be removed from your file three (3) years from the date you satisfied the proposal or six (6) years after the date you defaulted on the account, whichever date comes first.

What is the catch of a consumer proposal? ›

Paying off debt with a consumer proposal will negatively affect your credit. You will get out of the unsecured debt you owe in 60 payments or less. The agreement is legally binding, so if you break it you will not receive a refund on the fees that you paid.

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