How Much Do You Pay Back in a Consumer Proposal?

Consumer proposals serve as a powerful tool for Canadians seeking to manage their financial obligations. This legal process allows individuals to repay only a portion of their debts, typically without interest, fees, or additional penalties. So, how much do you pay back in a consumer proposal? This article provides an in-depth analysis of the process, including the factors that influence the repayment amount.

Understanding Consumer Proposals

A consumer proposal is a formal, legally binding process that is administered by a Licensed Insolvency Trustee (LIT). In this process, you make a proposal to your creditors where you pay back a percentage of what is owed to them, or extend the time you’re given to pay off the debts, or both.

Benefits of a Consumer Proposal

Consumer proposals offer numerous benefits, including:

1. Reduced Debt: Debts can be reduced by a substantial percentage, often by 70-80%.
2. Interest-Free Repayments: You don’t have to worry about interest, fees, or additional penalties.
3. Flexible Payment Terms: The maximum time period for a consumer proposal is five years, but there is no minimum term.

Factors Affecting the Repayment Amount

The amount you pay back in a consumer proposal depends on several factors:

1. Total Amount of Debt: Your LIT will consider the total debt you owe when determining your repayment amount. Typically, you should be able to repay at least 20-40% of your total debt for a consumer proposal to be a viable option.
2. Bankruptcy Comparison: Your LIT will also consider how much your creditors could expect to be repaid if you were to file for bankruptcy instead of a consumer proposal.
3. Income: Your income level and ability to make payments also factor into the calculation.
4. Personal Circumstances: The LIT will consider your household budget, family size, and personal circumstances to ensure that your consumer proposal is manageable and allows you to become debt-free.

Real-Life Examples of Consumer Proposals

To illustrate how much you may end up paying in a consumer proposal, here are some real-life examples:

1. One individual had $9,000 of consumer debts due to periods of unemployment. They offered to repay $4,800 over 24 months, reducing their debt by almost 50%.
2. Another individual had nearly $84,000 of debt due to periods of unemployment and supporting extended family. They offered to repay $28,200 over 60 months, reducing their debt by almost 70%.
3. Another person had over $140,000 of debt due to medical expenses and difficulties obtaining employment. They offered a lump-sum payment of $36,000, reducing their debt by almost 75%.

Starting a Consumer Proposal

To start a consumer proposal, you need to connect with a Licensed Insolvency Trustee in your local area. Consultations are free, and you are under no obligation to proceed with any process.

Bottom Line

The amount you pay back in a consumer proposal depends on various factors, including your total debt, income, and personal circumstances. It’s essential to consult with a Licensed Insolvency Trustee to understand your options and create a plan that’s suitable for you.

Remember, the goal of a consumer proposal is to help you become debt-free in a manageable and stress-free way. So, it’s crucial to ensure that your repayments are affordable and won’t cause you any undue hardship.

Additional Resources

For more information about consumer proposals and managing debt, consider these additional resources:

1. Understanding Debt Liability for Couples & Families
2. How do Consumer Proposals Compare to Debt Consolidation Loans?
3. When is Filing for Personal Bankruptcy the Best Option?

In conclusion, understanding how much you pay back in a consumer proposal is crucial for making an informed decision about your financial future. Always consult with a Licensed Insolvency Trustee to ensure that you’re making the best choice for your unique circumstances.