A frequent question Canadians ask when seeking formal debt relief is: “How much does a consumer proposal actually cost each month?” In Canada, consumer proposal fees are based on what you can realistically afford and what your creditors expect to receive—not on an hourly bill from a Licensed Insolvency Trustee (LIT). All administrative and statutory government fees are built directly into your agreed monthly payment, never added on top.
How Consumer Proposal Cost Works in Canada
A Canadian Consumer Proposal is a legally binding settlement under the Bankruptcy and Insolvency Act (BIA) where you offer to repay only a portion of your unsecured debts over a term of up to 5 years.
- Interest Free: Accumulating interest drops to 0% as of your legal filing date.
- Better for Creditors: Your total offer must provide creditors a better financial recovery than they would receive if you filed bankruptcy.
- Fixed & Affordable: Monthly payments remain fixed even if your income increases during the term.
- All-Inclusive Tariff: Trustee compensation and government filing fees are set by a strict tariff under Rule 129 of the BIA and are drawn directly from the estate pool.
What Fees Are Built Into a Consumer Proposal?
In Canada, all administrative expenses are deducted from the single payment you make each month. You never receive an additional invoice:
1. Government Filing & Levy Fees
A statutory filing fee is paid to the Office of the Superintendent of Bankruptcy (OSB), along with a 5% regulatory levy on distributions made to creditors. These are drawn directly from your proposal funds.
2. Licensed Insolvency Trustee (LIT) Tariff
Regulated by Rule 129 of the BIA, the trustee’s fee consists of a fixed administration fee ($1,500 total, drawn in two statutory installments) plus 20% of funds distributed to creditors, along with mandatory financial counseling session fees.
3. No Upfront Consultation Fees
Initial consultations with a Licensed Insolvency Trustee are 100% free. Beware of unregulated third-party “debt consultants” who demand large upfront fees simply to refer you to a trustee.
How Your Monthly Payment Is Calculated
Your trustee evaluates three primary factors to determine an acceptable offer:
- Household Budget: What you can realistically afford to pay after covering housing, food, utilities, and essential living expenses.
- Asset Equity & Income: What creditors would receive if non-exempt assets or surplus income were liquidated in a personal bankruptcy.
- Total Unsecured Debt: The overall amount owed across credit cards, personal loans, lines of credit, and qualifying CRA tax debt relief claims.
Factors That Affect the Cost of a Consumer Proposal
- Home Equity & Assets: If you hold significant home equity above provincial bankruptcy exemptions, your proposal offer must reflect that value so creditors recover more than in bankruptcy.
- Income Level: Higher household earnings mean creditors will expect a larger total recovery.
- Creditor Composition: Major institutional lenders and the Canada Revenue Agency have specific baseline percentage expectations for proposal approvals.
Example Cost Scenarios
Example 1: $40,000 Unsecured Debt
Assuming minimal non-exempt assets, a trustee might propose $300/month for 60 months (Total: $18,000). You eliminate $40,000 in principal debt plus all future interest, saving $22,000.
Example 2: $70,000 Unsecured & Tax Debt
With moderate income, a trustee might propose $500/month for 60 months (Total: $30,000). All trustee and government fees are deducted from the $30,000 pool, and the remainder settles all debts in full.
Consumer Proposal Cost vs. Bankruptcy Cost
While bankruptcy may sometimes cost less in simple low-income cases, a consumer proposal provides distinct long-term advantages:
- Protect All Assets: You keep 100% of your assets—including home equity, TFSAs, RESPs, and vehicles.
- No Surplus Income Penalties: If your income increases during a proposal, your monthly payment never changes.
- Better Credit Rating: Proposals are noted as an R7 rating on credit reports rather than the severe R9 bankruptcy notation.
Questions to Ask Your Licensed Insolvency Trustee
- “Based on my household budget, what would my monthly proposal payment be?”
- “How does this offer compare to surplus income costs in a bankruptcy?”
- “Are all trustee, counseling, and OSB filing fees completely covered within this payment?”
- “Can I pay off my proposal early without penalty?”
Frequently Asked Questions About Consumer Proposal Cost
Is there a flat fee for a consumer proposal in Canada?
No. There is no single flat fee that applies to everyone. The cost of a consumer proposal is the total settlement amount you offer your unsecured creditors, spread over a period of up to 60 months. Regulated trustee fees and government filing fees are deducted from that total payment pool.
Do I have to pay my Licensed Insolvency Trustee separately?
No. You do not pay your Licensed Insolvency Trustee separately. Their professional fees, administrative costs, and required government filing disbursements are built directly into your single monthly payment according to a tariff regulated by federal law.
Is a consumer proposal cheaper than bankruptcy?
Whether a consumer proposal is cheaper depends on your income, assets, and total debt. While bankruptcy might cost less in simple, low-income cases, a consumer proposal is often far more advantageous if you have income above surplus thresholds or non-exempt assets (like home equity) that you want to protect.
Are there hidden fees in a consumer proposal?
No. All fees charged for administering a consumer proposal are strictly governed under federal Bankruptcy and Insolvency Act regulations. Your initial consultation with an LIT is completely free, and all costs are fully disclosed in writing before filing.
Can I pay off my consumer proposal early?
Yes. You can increase your monthly payments or make lump-sum contributions to pay off your proposal early without any prepayment penalty. Completing your proposal early shortens your time in the program and allows you to start rebuilding your credit score sooner.