How Consumer Proposal Payments Calculated

Consumer proposal payments are calculated to get out of debt over a 3-5 year period.

When it comes to consumer proposals, the cost is not set in stone as it varies for each individual based on their unique financial circumstances.

However, a common outcome of consumer proposal payments is the total amount of debt is reduced by 70% or more.

• Considerations for Consumer Proposal Payments
• Calculation Process for Consumer Proposal Payments
• Step 1: Estimating Potential Repayments
• Step 2: Creditor Repayment Expectations
• Step 3: Determining Your Monthly Payment

Crafting a viable plan to present to your creditors is an essential part of the consumer proposal process. Your trustee considers three primary factors when determining the payment amount:

Debts and Creditors: The first step involves assessing your outstanding debts and the amount owed to each creditor.

Assets and Bankruptcy Costs: The trustee examines any assets you possess and evaluates the potential expenses associated with declaring bankruptcy. This step is crucial in determining the value you would have to pay if bankruptcy were pursued.

Budget and Affordability: Your trustee carefully analyzes your budget and assesses whether you can realistically afford the proposed payment amount.

The calculation of your monthly consumer proposal payment takes into account one or a combination of these factors.

It’s important to note that determining the payment amount is typically one of the final steps before filing the necessary documents with the Superintendent of Bankruptcy. As the Trustee, we ensure that the monthly payment is reasonable within your family budget, offers better recovery prospects for creditors compared to personal bankruptcy, and is attractive enough to garner creditor support.

Since every individual’s financial situation is unique, a final decision regarding the payment amount can only be made after a comprehensive review of all financial information.

To arrive at an appropriate payment amount, your trustee follows these steps:

• Step 1: Potential Repayments:  The trustee calculates the potential recoveries for creditors if you were to opt for bankruptcy. For instance, in a bankruptcy scenario, creditors could claim any equity in your house, and you might be required to make additional payments based on your income. These additional payments are known as Surplus under the Bankruptcy and Insolvency Act.The trustee must ensure that your consumer proposal offers more than what creditors would recover in a bankruptcy situation.

• Step 2: Creditor Expectations: The trustee reviews your creditors’ preferences and expectations. Different creditors may have internal policies mandating minimum payouts, while others carefully scrutinize your proposed budget plan and specific expenses.It is worth noting that consumer proposal payments generally amount to less than other available debt relief options.

• Step 3: Determining Monthly Payments: Finally, the trustee analyzes your budget to ensure that the proposed monthly payment is affordable for you and acceptable to creditors. The calculation is relatively straightforward: the proposed total payout, based on expected recoveries and creditor requirements, is divided by the duration of your proposal in months. Consumer proposal payments can span up to five years or 60 months.If you are seeking a lower monthly payment, it can be spread over the full 60 months. However, if you can afford higher monthly payments, you have the flexibility to shorten the proposal term or even offer a lump sum payment.

Determining the monthly payment amount in a consumer proposal requires understanding of your background, debts and ability to pay. Only a licensed Trustee in Bankruptcy is authorized to file a consumer proposals under the Bankruptcy and Insolvency Act.

• How is the cost of a consumer proposal determined? The cost of a consumer proposal is determined based on an individual’s unique financial circumstances, such as their income, assets, and debts. On average, it allows for settling debts at around 30-40% of the original amount owed.

• What factors are considered when calculating consumer proposal payments? Consumer proposal payments are calculated by considering factors such as outstanding debts, creditors involved, the presence of assets, potential bankruptcy costs, and the affordability of payments within one’s budget.

• At what stage is the payment amount determined in a consumer proposal? Typically, the payment amount is determined as one of the final steps before filing the necessary documents with the Superintendent of Bankruptcy.

• How are monthly consumer proposal payments calculated?  Monthly consumer proposal payments are calculated by dividing the proposed total payout, based on expected recoveries and creditor requirements, by the length of the proposal in months.

• Who has the authority to file a consumer proposal? Only a licensed Trustee in Bankruptcy is authorized to file a consumer proposal under the Bankruptcy and Insolvency Act.