When it comes to costs involved in filing a Consumer Proposal, there are a couple of important points. First, costs are federally regulated and prescribed by a tariff contained in insolvency legislation. Second, all costs associated with filing a Consumer Proposal are paid from the Proposal funds so the consumer is not handed a bill for costs at any time during the Proposal. In effect, the Proposal funding covers administration costs and payments to creditors.
The costs involved in filing a Consumer Proposal are:
To illustrate the costs associated with filing a Consumer Proposal, here is a breakdown of the costs and distributions associated with a Consumer Proposal offering payments totalling $20,000.00:
The timing of costs involved in a Consumer Proposal is also prescribed by insolvency legislation. The filing fee payable to the government is due upon filing the Proposal and the costs of counselling are payable as the counselling sessions are completed. The initial Trustee fees of $1,500.00 consists of two separate draws: the Trustee is eligible to draw $750.00 upon filing the Proposal and $750.00 upon Court approval of the Proposal, but in any event only as soon as Proposal funds become available. In other words, if the Consumer Proposal calls for monthly payments of $300, it will take over a year for the Trustee to receive payment for these initial fees.
Creditors typically begin to receive distributions after payment of the filing fee, initial Trustee fees and counselling fees. The Consumer Proposal must set out how often creditors will receive distributions. Each time a distribution is made to creditors, the Trustee receives 20% of the distribution, plus applicable taxes and 5% is deducted from the creditor payments for payment to the Superintendent of Bankruptcy.
This is the last of five blogs I wrote for MNP Debt's Series on Consumer Proposals. The first, second, third and fourth posts in the series can be found here.
Lana Gilbertson is a Licensed Insolvency Trustee serving Greater Vancouver and Vancouver Island. To learn more about how Lana can help, contact her at email@example.com or 604-637-1599.