How a consumer proposal payment is calculated, and why it is not a percentage of your debt

What actually sets your payment

There is no table that says a consumer proposal costs 30 percent of your debt. Some proposals are much less. Some are more. The difference is almost never the amount of debt itself. It is what a bankruptcy would have returned to your creditors.

That is the whole idea. Your payment is set by what your creditors would have collected if you went bankrupt instead, plus enough more that saying yes is worth their while. A consumer proposal is a deal, and a deal only works if the other side does better than their alternative. Your creditors’ alternative is to keep collecting the ordinary way: interest, a lawsuit, a judgment, wage garnishment, and in some cases a bankruptcy. What a bankruptcy would have returned to them is the benchmark the proposal is measured against. A Licensed Insolvency Trustee, the federally licensed professional who is the only person allowed to file and administer a proposal, begins with that bankruptcy comparison benchmark when working out whether a proposal is likely to be acceptable. In practice, a proposal that falls materially below it is unlikely to succeed, while one that exceeds it generally gives creditors a meaningful reason to accept the proposal instead of allowing a bankruptcy to proceed. It is not a fixed formula, and not always a small margin.

The benchmark comes from two calculations. The first is your surplus income, which is the part of your take-home pay that sits above a government line for a household your size. The second is the value of anything you own that a bankruptcy could sell. Add those together and you have the benchmark: what a bankruptcy would have returned. That total is what the proposal is measured against. Nothing else drives the price: not a percentage anyone quotes you, not how much you owe, not how good or bad you feel about the debt.

That is why “30 percent” fails in both directions. For some people it is too high. If your income is modest and you own little that could be sold, a bankruptcy would return very little, so your proposal can be small, and 30 percent of your total debt would be far more than you ever needed to offer. For other people it is too low. If you own a paid-off second vehicle or an investment account, a bankruptcy would sell those, so your proposal has to at least match that value, and 30 percent of your debt might not come close. The number moves because the two inputs move. The percentage is a rumour. The arithmetic is the answer.

You do not have to take anyone’s word for the arithmetic. The Consumer Proposal Calculator, linked at the top of this page, runs it for you. The first screen estimates your surplus income from your household size and take-home pay. The second screen adds the value of anything you own that is not protected by law. The result is one number: the benchmark your payment is measured against.

Most calculators online hand you a single figure and stop there. This one does more. Under the result sits a panel called “Show the trustee’s math”, and opening it lays out every step in between, in the same terms a Licensed Insolvency Trustee uses on a working file: your surplus income worked out line by line, the bankruptcy comparison itself, the regulated costs a bankruptcy would take out along the way, and the estimated return to your creditors at the end. Nothing is hidden inside a black box. The number is still an estimate to help you think, not a quote: only a Licensed Insolvency Trustee who has seen your actual paperwork can give you the real figure.

The estimate is not a fixed verdict. It is a working model you can push on. Try raising the monthly payment you are testing by $50 and watch the benchmark indicator respond, or change the length of the plan and see what moves. What you should not do is adjust the value of what you own. Your assets, the equity in your home, and the balance on any secured loan are facts about your situation, not dials to turn. Enter them honestly, and let the payment be the thing you experiment with, because the payment is the part that is genuinely yours to decide.

Once you know the bankruptcy comparison benchmark, go back to the Consumer Proposal Calculator - Level 1 (Years to Pay Off Debt). If the payment you were already testing is close to the benchmark, the picture is internally consistent. If it is much lower, revisit your assumptions. Together the two levels explain both how long paying the debt off on your own might take and why a proposal payment can be very different.

What does this cost you out of pocket? Nothing up front. The Licensed Insolvency Trustee who administers your proposal is paid out of the payments you make, on a schedule of fees set by federal regulation. Every Licensed Insolvency Trustee charges that same schedule, because it is written into the rules, not negotiated at the table. Two debtors can still be quoted two different proposal payments, because the payment is built from each debtor’s own income and assets, not from the trustee’s fee. If you are comparing offers, that is the thing to look at: the payment reflects your numbers, while the regulated fee behind it is the same everywhere. If you are wondering whether the free first meeting has a catch, it does not, and the reason is itself written into a directive. That answer lives on the CRA (Canada Revenue Agency) garnishment guide, at its question on whether the free first meeting has a catch.

Consumer proposals are not priced by percentages. They are priced by comparison. The Consumer Proposal Calculator, linked at the top of this page, is where you run that comparison on your own numbers, and any Licensed Insolvency Trustee can walk through the result with you. That is the calm next step, and there is no clock on it.

Frequently asked questions

These are the cost questions readers ask most. Each answer gives the verdict first, and routes to a Licensed Insolvency Trustee or to the Papers analysis where the detail belongs.