What Is The Cost Of A Consumer Proposal?

There are two components to the cost of a consumer proposal: (1) the cost of filing it; and (2) your consumer proposal payments.

The cost of filing a consumer proposal

A filing fee is paid to the Office of the Superintendent of Bankruptcy which appoints your Licensed Insolvency Trustee as the administrator of your consumer proposal. As of this writing, the filing fee is $104.03 and it will increase to $107.57 on March 31st 2023.

When you file a consumer proposal with Fong and Partners Inc., this is the only cost you’ll pay until your proposal has been approved by your creditors.

Debt consultants

Beware of debt consultants who are not Licensed Insolvency Trustees who may charge you a substantial fee simply for referring you to a Trustee with whom they have business relationship.

A report published by the Office of the Superintendent of Bankruptcy in April 2017 admonishing LITs who work with debt consultants noted the following:

Debtors served by LITs who had ongoing relationships with debt consultants usually ended up paying thousands of dollars more for the administration of their insolvency than debtors who were not sourced through a debt consultant.

Typically, debt consultants required a consumer debtor to sign a fee agreement for consulting services prior to being introduced to a “selected LIT.” Debtors typically understood the role of the LIT as being limited to meeting with the debtor to “file” the proposal developed by the debt consultant.

In the cases reviewed the amount of the consulting fee portion of the agreement between the consumer debtor and the debt consultant averaged approximately $2,400 and reached as high as $4,200. For lower value proposals the consulting fee commonly ranged from 20 to nearly 40 % of the value of the proposal.

This practice is prevalent enough that the OSB has raised this as a major issue in the consumer insolvency industry. Therefore, you should be wary of filing a consumer proposal with any LIT who’s involved in such a business arrangement as it may end up costing you thousands of dollars more than what you’d otherwise need to pay.

How are Consumer Proposal payments calculated?

A consumer proposal is a legal settlement under the Bankruptcy and Insolvency Act that can be paid monthly over up to 60 months.

Your Licensed Insolvency Trustee will  calculate your monthly payments based on what you can afford to pay and what would be acceptable to your creditors  which will be determined by the following factors:

• • The income of your household and your contribution to it.
  • Your assets.
  • The total amount of debt you owe.
  • Which specific creditors you owe.
  • Whether you’ve previously filed for bankruptcy.

All other things being equal:

• • The higher your monthly income, the higher the consumer proposal payments your creditors will expect you to pay.
  • The more assets you have, the larger the settlement your creditors will expect from your consumer proposal.
  • The more debt you have, the more money your creditors will expect you to pay in your consumer proposal.
  • Certain creditors such as the Royal Bank of Canada or the Canada Revenue Agency will likely demand more money than what you’ve offered when you filed your consumer proposal. They will usually request a meeting of creditors to negotiate for more money from you.
  • If you’ve previously been bankrupt, this may be an factor in determining how much money you’ll need to offer your creditors in your proposal before they’ll accept it. This is particularly true for creditors such as the Canada Revenue Agency.

How are consumer proposal fees paid?

A Licensed Insolvency Trustee’s fees are paid out of the proposal fund (i.e., the accumulation your monthly payments in his trust account) in accordance with a tariff under the Bankruptcy and Insolvency Act. Specifically, your Trustee pays out from his trust account:

1. 1. The $104.03 OSB filing fee described in the first paragraph above
   2. $750.00 plus sales taxes upon the filing of your consumer proposal
   3. $750.00 plus sales taxes after your consumer proposal has been approved by your creditors
   4. $170.00 plus sales taxes for two mandatory financial counselling sessions
   5. 20 percent of funds distributed from his trust account plus sales taxes

In other words, you do not pay a separate fee for a Trustee’s services – your proposal payments include the Trustee’s fees as well as the settlement payment to your creditors.

To illustrate the costs of a consumer proposal, here’s a breakdown of the costs and distributions associated with a proposal offering offering payments totaling $18,000.00:

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