The Cost of a Consumer Proposal in Ontario
A consumer proposal is a legal process through which you make an offer to settle your debts with your unsecured creditors. In this offer, you propose repaying your unsecured creditors on terms that are affordable for you. In most cases, you propose to pay a portion of the debt that you owe over a specific period of time. One common question that many have is how much does a consumer proposal cost. This causes people to search for a consumer proposal calculator in order to find this information.
However, there are a number of factors that go into a consumer proposal and many of these factors cannot be taken into consideration with a simple online calculator.
The calculation of how much a consumer proposal will cost is very much unique to each individual. When you meet with a trustee, he or she will sit down with you and review your financial situation in detail. Most trustees offer this initial consultation at no charge. Meeting with a trustee does not just give you the opportunity to find out the terms of a consumer proposal and a trustee is more than just a consumer proposal calculator. After your trustee reviews your situation, he or she will inform you of the potential options that are available to you. Trustees have to study and pass an examination and are licensed by the federal government and are also bound by a strict code of ethics, so they will give you information on ALL options, not just the ones that they can assist you with. This information will allow you to make an informed decision as to how you would like to proceed. Take advantage of the free initial consultation offered to find out what works best for you.
Filing a Consumer Proposal
If you choose to proceed with a consumer proposal, your trustee will determine what a fair offer to your unsecured creditors will be. When determining this amount, the trustee considers several factors related to your income and monthly expenditures, and how much your creditors would get if you filed for bankruptcy. This encourages creditors to accept your offer, as they will review it and recognize that they will receive more if they accept the proposal than if the proposal is rejected and you need to file for bankruptcy.
Consumer proposal payments are made (generally each month) to a trustee in bankruptcy (who is called a proposal administrator in this process). The trustee then distributes the payments to your unsecured creditors. Once you have made all of the agreed upon payments and completed your duties, the remaining outstanding debt is forgiven. A consumer proposal is a way to eliminate your unsecured debt while making payments that you can afford.
Consumer Proposal Costs
Each consumer proposal is different. However, consider this example. If you have unsecured debts of $25,000 and non-exempt assets of $5000 and no surplus income, the $5000 will go into your estate for the benefit of your creditors ( net of fees payable to the trustee) and your creditors will likely receive about 5-6 cents on the dollar if you file bankruptcy. t. You will lose your non-exempt assets, as these go to the creditors, tax refunds and have to report your monthly income and report any assets you acquire during the process. However, a consumer proposal for this same level of debt ( and income) could be structured so that you pay $125 each month for 60 months. This is a total of $7500 and, after fees, the creditors would get 15-16 cents on the dollar. However, you get to keep all of your assets. There is no impact on your taxes and you keep all refunds. If your situation changes, such as an increase in salary or you have a windfall, or you sell your house and you have equity, you can keep all proceeds. Your employer cannot terminate your employment because you filed a consumer proposal. Secured creditors, such as mortgages and car loans cannot cancel any contract you are continuing to pay just because you filed a proposal. A proposal is a legal contract negotiated with your creditors at the date it is filed. Once accepted, you are free to continue to deal with your assets as you wish. As you can see, this situation works out better for your creditors as they get more money. It also works out better for you since you do not typically lose any assets when you file a consumer proposal.
This example is just one hypothetical situation. When it comes to consumer proposal calculations, each situation is different. It’s also important to note that there are no additional fees with a consumer proposal. All administrative fees are taken out of the payments made to your creditors. In addition, these fees are set and regulated by the federal government. If you are considering working with a debt management company, credit counsellor or financial advisor, keep this fact in mind. Fees for many of these services are not set or regulated and do not form part of the money offered to creditors. All payments made to a trustee through a consumer proposal count towards your offer to settle.
Other Consumer Proposal Details
There are a number of other details that are important to keep in mind if you are considering a consumer proposal. Beyond the cost, a consumer proposal also provides you with specific legal protection. This protection ensures that most civil legal action against you will stop. Most wage garnishments will stop as well. Unsecured creditors are not able to contact you or send collection agencies after you. In fact, all communication with your unsecured creditors will be done through the trustee.
If you are considering the options available to you, a consumer proposal calculator may help you understand the cost of a consumer proposal. However, meeting with an Insolvency Trustee and fully understanding all available options will provide you with the detailed information you need in order to find the right solution for your specific needs.