How Much Does a Consumer Proposal Cost? Real Numbers by Province

TL;DR

A consumer proposal in Canada typically costs between 20% and 50% of your total unsecured debt, spread over a maximum of five years. The Licensed Insolvency Trustee's fee is included in your monthly payments — you do not pay them separately. For someone with $30,000 in unsecured debt, total payments generally range from $6,000 to $15,000 depending on your income, assets, and what creditors will accept.

How Consumer Proposal Costs Are Determined

The amount you pay in a consumer proposal is not a fixed formula. It depends on several factors that your Licensed Insolvency Trustee will evaluate during your initial consultation.

The core principle is straightforward: your proposal must offer creditors more than they would receive if you filed for bankruptcy. This is known as the "bankruptcy comparison test." Your LIT will calculate what creditors would receive in a bankruptcy scenario (based on your non-exempt assets and potential surplus income payments) and ensure your proposal exceeds that amount.

Factors that influence the total cost include:

• Total unsecured debt: The starting point for calculating the percentage you will repay
• Your monthly income: Higher income generally means creditors expect a larger repayment
• Your household expenses: Reasonable living expenses are factored into what you can afford
• Non-exempt assets: If you have significant equity in assets, creditors may expect more
• Surplus income calculation: If your income exceeds the OSB threshold, this affects the comparison
• Creditor expectations: Some creditors (particularly CRA) have known minimum acceptance thresholds

LIT Fees Explained

One of the most common misconceptions about consumer proposals is that the LIT charges you a separate fee. This is not the case.

LIT fees for consumer proposals are governed by the BIA tariff (specifically, Directive No. 16 from the OSB). The trustee's compensation comes from the funds you pay into the proposal. The fee structure includes:

• A percentage of distributions made to creditors
• A counselling fee for the two mandatory financial counselling sessions
• An administration levy paid to the OSB (5% of distributions)

Because the fee comes from within your payments, the total amount you pay each month includes everything — trustee fees, the OSB levy, and the distribution to creditors. There are no hidden costs or add-on charges.

Real Cost Examples

To give you a practical sense of what a consumer proposal might cost, here are some representative scenarios. These are illustrative — your actual offer will depend on your specific circumstances.

Scenario 1: $20,000 in unsecured debt, modest income A person earning $3,200/month with $20,000 in credit card debt might offer $200/month for 48 months, totalling $9,600 (48% of the debt). Creditors would receive roughly 30 cents on the dollar after fees.

Scenario 2: $40,000 in unsecured debt, above-average income Someone earning $5,500/month with $40,000 in mixed unsecured debts might offer $400/month for 60 months, totalling $24,000 (60% of the debt). The higher offer reflects the fact that surplus income payments in bankruptcy would also be significant.

Scenario 3: $60,000 in unsecured debt, including CRA debt A self-employed individual owing $60,000 (of which $25,000 is to CRA) might offer $500/month for 60 months, totalling $30,000 (50%). CRA often expects a higher recovery rate, which can push offers upward.

Use our consumer proposal calculator for an estimate based on your own numbers.

Provincial Considerations

While consumer proposals are governed by federal legislation (the BIA), provincial differences can affect costs indirectly.

Each province sets its own bankruptcy exemption limits. These exemptions determine how much of your assets you could keep in a bankruptcy, which in turn affects the "bankruptcy comparison test" that sets the floor for your consumer proposal offer.

For example, Alberta and Saskatchewan have relatively generous exemptions for home equity, meaning the bankruptcy comparison baseline may be lower, which could result in a lower consumer proposal payment. Ontario and British Columbia have more modest exemptions, which may push consumer proposal offers higher if you have home equity.

The cost of living in your province also matters. Your LIT will factor in reasonable monthly expenses when determining what you can afford to pay. Housing costs in Vancouver or Toronto are obviously higher than in Winnipeg or Moncton, and this is reflected in affordability assessments.

What Happens If You Cannot Afford the Payments

If your financial situation changes during your consumer proposal, you have options. You can request an amendment to your proposal — essentially renegotiating the terms with your creditors. This might involve extending the payment period (up to the 5-year maximum) or reducing the monthly amount.

If you miss three months of payments, your proposal is automatically annulled. At that point, your debts are reinstated at their original amounts (minus any payments already made), and creditors can resume collection activities. You could file a new proposal or consider other options, including bankruptcy.

FAQ

Do I pay the LIT directly for their services? No. The LIT's fees come from the payments you make into the proposal. The fee structure is set by federal regulation. You should never be asked to pay a separate upfront fee for a consumer proposal — if someone asks for one, that is a red flag.

Can I pay off my consumer proposal early? Yes. You can make lump-sum payments at any time or increase your monthly payments to complete the proposal sooner. There is no penalty for early completion, and finishing early means the credit report notation may be removed sooner.

What if I have both secured and unsecured debts? A consumer proposal only covers unsecured debts. Secured debts (mortgage, car loan) are not included. You continue making payments on secured debts as normal. If you are behind on secured debt payments, a consumer proposal will not fix that issue directly.

Sources

• Office of the Superintendent of Bankruptcy — Directive No. 16
• Canadian Association of Insolvency and Restructuring Professionals (CAIRP)
• Bankruptcy and Insolvency Act (BIA), R.S.C., 1985, c. B-3