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How much does a consumer proposal cost: Only pay a Trustee for consumer proposal services
This Brandon Blog answers the question “how much does a consumer proposal cost?”. There is one thing that I want to get out of the way first, that directly impacts the cost of a consumer proposal. The only party authorized by law to administer a consumer proposal in Canada are licensed insolvency trustees (formerly called bankruptcy trustees).
There are many firms that advertise that they will settle your debts without you having to see a licensed insolvency trustee (formerly called a trustee in bankruptcy). They sell you on the sizzle of staying away from a licensed trustee implying that visiting a reputable bankruptcy trustee will immediately mean that bankruptcy will be your only option.
These firms promise a lot but deliver little or nothing. In return, you need to pay the high fees. Then, when they have charged you everything they can, they walk you down the street to a licensed insolvency trustee (Trustee) to administer a consumer proposal for you. So they end up taking you to the exact professional they first told you to avoid when they cannot charge you any more fees. Why can’t they charge you any more fees? Because by then, you have wised up to their game!
So do yourself a favour. The easiest way to know how much does a consumer proposal cost is to make an initial Trustee visit for a no-cost initial consultation to learn all your debt relief options and forget about the non-licensed debt management company.
How much does a consumer proposal cost: Getting rid of debt
When you are buried in debt, things like saving for the future can seem impossible. This is because you are trying to climb up a hill with a heavy backpack on your back, making it hard to take a step forward. You may even be tempted to stop trying when you hear everyone else talking about how they are able to save so much, but you wonder why you can’t.
If you’re looking at a pile of unpaid bills and thinking, “I just can’t afford to make those payments” or “I can’t believe I’m falling so far behind,” you’re not alone. But you’re not hopeless. It is possible to get out from under crushing debt and start getting ahead. The first step is to stop making the situation worse with missed payments and late fees. To do this, you need to make a plan.
Managing your debt is a lot like dieting – it looks easy and straightforward on the commercials, but when you get down to doing it, it’s a whole different story. There are hundreds of books and websites out there, each with different tips and techniques that you can follow to help you get a handle on your debt. Here are a few things to consider:
As I have written in several blogs before, a self-help remedy is always the best. First look at all your monthly income sources and all your expenses for a typical month. Create a budget showing what it all is so that you can figure out how much more you are spending each month than you earn. Now, look critically at all your behaviours during a typical month that leads to that spending. What can you cut out?
Also, look at your total monthly income. Do you have the time for and ability to either get a second part-time job or create a side hustle for yourself in order to earn more income? Based on all this reflection, what is the best budget you can come up with to try to spend no more than you earn, after-tax? This will let you see if you can work yourself out of your financial challenges by having excess money each month to pay off your debts or not.
If yes, terrific. Put your plan into play and pay down your debts. Curb your credit card spending so that you only charge what you can pay off by the due date. If not, then perhaps you need to visit a Trustee.
How much does a consumer proposal cost: Get a personalized debt free plan
When people talk about getting out of debt, it can sometimes be hard to know where to start. If you’re stressed about your financial situation, the last thing you want is to be confused by too many options and not know what to do. Thankfully, there’s a way to get a personalized debt-free plan that will help you figure out what to do and how to get out of debt. We can help you develop a debt relief plan that will put you on the path to a debt-free life.
If you have overdue consumer financial debts, you are receiving telephone calls from financial debt collectors. Although personal bankruptcy gives a fresh start for those that are drowning in debt, in my view, it is the last resort for those that have maxed out their credit cards. If you require an financial clean slate, a consumer proposal is an excellent way to relieve yourself of the stress and anxiety of too much debt. It is the only federal government-approved method for debt settlement.
In an initial no-cost consultation with a Trustee, all possible debt relief options will be discussed. At the end of the consultation, you will have a clear understanding of what personalized debt-free plan is best for you. Let us know dive deeper into how much does a consumer proposal cost.
How much does a consumer proposal cost: A negotiated debt settlement
You can easily look back on some of my earlier blogs to refresh yourself on all the details of what a consumer proposal is and how it works, including my Brandon Blog CONSUMER PROPOSAL FAQ: ANSWERS TO 10 TANTALIZING CONSUMER PROPOSAL QUESTIONS. To save you time, the important points to remember are that in the consumer proposal process:
- You can settle your unsecured debts totalling a level of debt of $250,000 or less, not including any mortgages or lines of credit secured by way of a mortgage or other charge against your personal residence.
- The settlement of debts will be at a total dollar settlement value much less than the total outstanding debt you owe.
- The amount you will have to pay in a consumer proposal is based on what your creditors can expect from your bankruptcy. The bankruptcy statute in Canada states that your offer in the consumer proposal must be better than what your unsecured creditors would receive in your bankruptcy. Although there is no guarantee as to what the final amount will be, as a general rule of thumb, you can consider a consumer proposal totalling 25% of the total amount you owe as a good rule of thumb.
- You can take a period of time up to 5 years to make monthly consumer proposal payments to the Trustee, who acts as the Administrator of your proposal, to pay the entire consumer proposal fund. The Trustee then makes the required creditor distributions to your unsecured creditors on a pro-rata basis.
- A Trustee is the only debt professional in Canada who is licensed and supervised by the Canadian government, through the Office of the Superintendent of Bankruptcy Canada. A Trustee is the only professional that can offer consumer proposals services.
how much does a consumer proposal cost
The Cost of a Consumer Proposal in Ontario
In Canada, the term consumer proposal refers to a formal, legally binding arrangement between a debtor and creditors, involving a lump sum payment spread over equal monthly payments to the Trustee but taking no more than 60 months.
This money is then used by the Trustee to make the necessary creditor distributions in return for a consumer proposal discharge. The creditors agree to accept a portion of the outstanding debt in full settlement. A consumer proposal is a viable option for those who are having trouble paying their debts because they are disabled, unemployed, or have suffered a loss of income.
How much does a consumer proposal cost is on everyone’s mind when they contemplate filing one. When we think of cost, our minds first go to “how much will the licensed trustee charge me for all this?”. The reality is that the amount the insolvent debtor will have to pay to the Trustee who is called the Administrator in a consumer proposal to create the proposal fund is a direct result of what the unsecured creditors could expect to receive in the debtor’s bankruptcy filing. The statute says that the offer to the unsecured creditors has to be better than what they could expect to receive in the debtor’s bankruptcy.
Let’s look at a real example so I can better illustrate this. Assume we have an insolvent debtor who would be a first-time bankrupt. Assume that their personal situation in their filing for bankruptcy is as follows:
- Surplus income payments of NIL.
- Assets realization of $20,000 and non-exempt assets therefore not sold by the Trustee.
- Total liabilities of $173,000.
So in this bankruptcy process, the total fund that would provide for the payments to creditors would be $20,000 in the bankruptcy. The fee and disbursements allowed for the Trustee in this bankruptcy example are governed by the bankruptcy statute. The fee is therefore called a tariff fee. For purposes of figuring out what kind of consumer proposal would be required, the tariff fee of the Trustee in this bankruptcy is irrelevant.
Assuming the person in this example did not commit any sort of bankruptcy offence, there is nothing more to discuss as to what each creditor could expect out of the bankruptcy. They would receive their pro-rata share of the distribution.
In order for a consumer proposal to be a better alternative for the unsecured creditors, I suggest that a consumer proposal filing offering a total payment of $25,000 payable in regular monthly payments over a maximum five-year period would be appropriate.
This is the cost of this consumer proposal in Ontario, $25,000. As this example shows, how much does a consumer proposal cost has zero relationship to what my Firm would earn as the Administrator.
How much does a consumer proposal cost: Consumer proposal costs in Ontario
As the Administrator of a consumer proposal, I am entitled to a tariff fee stipulated in the Rules to the Bankruptcy and Insolvency Act (Canada). There are also some administrative expenses and taxes to be paid. What the tariff allows, to be paid from the consumer proposal fund, is as follows:
- $750 payable on filing a copy of the consumer proposal with the Official Receiver;
- $750 payable on the approval or deemed approval of the consumer proposal by the court;
- 20% of the money distributed to creditors under the consumer proposal, payable on the distribution of the money;
- the costs of counselling at $85 per session, payable after each session, to a maximum of two sessions;
- the fee payable to the official receiver in the amount of $100, payable at the time of filing a copy of the consumer proposal;
- the fee payable to the registrar in the amount of $50, but only if you have to go to Court; and
- all applicable taxes for GST/HST.
The final amount payable not listed above is the levy payable to the federal government calculated at 5% of any distribution made to the creditors. This payment to the government is what pays for the administration of the Canadian bankruptcy system.
So taking the above example of the $25,000 consumer proposal, the consumer proposal calculation assuming everything went smoothly and there was no need to go to Court would go as follows:
Category | $ |
| Payment under proposal | 25,000.00 |
| Counselling fees (2 x $85) for Administrator | 170.00 |
| The fee paid to the Official Receiver | 100.00 |
| Administrator’s fees | 1,500.00 |
| HST on above fees ($2,250) | 292.50 |
| The amount available for distribution | 22,937.50 |
| Administrator fee of 20% of the money distributed to creditors | 4,587.50 |
| Applicable HST | 596.37 |
| 5% Levy payable | 887.68 |
| Total amount to be distributed to the unsecured creditors | 16,865.95 |
So in this example, out of the total consumer proposal fund of $25,000:
- The amount paid for the consumer proposal is $25,000.
- This represents 14.5% of the total liabilities.
- The Administrator earned fees (net of HST) totalling $6,257.50.
- The Administrator earned fees are paid for by the unsecured creditors as it is deducted from the amount they would otherwise receive.
- Therefore, how much does a consumer proposal cost the insolvent debtor? The cost to the debtor for the Administrator’s services is FREE!
how much does a consumer proposal cost
How much does a consumer proposal cost: Get a personalized debt free plan today
I hope you enjoyed this how much does a consumer proposal cost Brandon Blog post. Are you worried because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option? Call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.
The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.
The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.
We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do. We help many people and companies stay clear of bankruptcy.
That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need, contact the Ira Smith Trustee & Receiver Inc. group today.
Call us now for a no-cost consultation.
We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.
We hope that you and your family are safe, healthy and secure during this coronavirus pandemic.
Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.
how much does a consumer proposal cost
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