Introduction

When considering a consumer proposal, the question that keeps many Canadians awake at night isn’t whether it’s the right choice, it’s “How much will I have to pay each month?” Even when people understand that a consumer proposal can reduce their debt by up to 80% and stop all interest, the uncertainty around the monthly payment can feel overwhelming. It’s one of the biggest reasons people delay reaching out for help.

And it makes sense. A consumer proposal is a legal negotiation with your creditors, and unlike a loan or credit card, there’s no simple formula you can plug numbers into. The payment you end up with is based on a combination of your financial situation, what your creditors expect to recover, and the professional assessment of a Licensed Insolvency Trustee (LIT). To someone exploring their options for the first time, it can feel mysterious, even intimidating.

But the truth is, consumer proposal payments follow a clear, structured logic. Once you understand the factors involved, the process becomes far less stressful. This guide breaks down exactly how monthly payments are calculated, what influences the final amount, and how your LIT works to ensure the terms are fair, realistic, and affordable for you. For many people, simply understanding the “why” behind the numbers is enough to replace fear with confidence and to make the entire process feel far more manageable.

How Consumer Proposal Payments Are Determined

A consumer proposal is not a loan, it’s a negotiated settlement. That means your monthly payment isn’t based on interest rates or amortization schedules. Instead, it reflects what your creditors are willing to accept in exchange for forgiving the remaining balance.

Licensed Insolvency Trustees evaluate several key factors when determining what your proposal should offer:

1. Total Unsecured Debt

Your total unsecured debt (credit cards, lines of credit, personal loans, tax debt, payday loans, etc.) forms the baseline. The higher the debt, the higher the expected settlement, but not proportionally. Someone with $80,000 in debt may not pay much more than someone with $50,000, depending on income and assets. Creditors are primarily concerned with recovery, not the original balance, which is why two people with very different debt levels can end up with similar proposal payments.

2. Available Income After Necessary Expenses

Your LIT reviews your monthly budget to determine what you can reasonably afford. This includes:

• Rent or mortgage
• Utilities
• Groceries
• Transportation
• Childcare
• Medical expenses
• Other essential costs

The goal is to ensure your proposal payment is sustainable, not burdensome. Your LIT will never recommend a payment that leaves you unable to cover basic living costs; affordability is a core requirement of the process.

3. Value of Non Exempt Assets‑Exempt Assets

If you own assets that would have value in a bankruptcy: such as investments, home equity, or a second vehicle, creditors expect to receive at least that value in a proposal. This ensures the proposal is a better financial outcome for creditors than bankruptcy, which is the benchmark they use when deciding whether to accept your offer.

4. Creditor Recovery Expectations

Creditors look at whether your proposal feels reasonable based on your income, assets, and repayment capacity. If they think the offer is too low, they won’t just reject it outright — they often come back with a counter‑offer. The goal is to land on a number that makes sense for both sides, and your Licensed Insolvency Trustee helps negotiate that middle ground.

5. Your Long Term Stability ‑Term Stability

Creditors prefer predictable, steady payments. Stable income often results in more favourable terms. If your income fluctuates, your LIT may structure the proposal more conservatively to increase the likelihood of acceptance and long term success.‑term success.

A consumer proposal is ultimately a balance: what you can afford and what creditors will accept.

The Minimum Offer Calculation

Every consumer proposal must meet a basic threshold: creditors must receive more than they would in a bankruptcy. This is known as the “minimum offer.”

Here’s how that minimum is calculated:

1. Bankruptcy Comparison

Your LIT estimates what creditors would receive if you filed bankruptcy. This includes:

• Any non exempt assets ‑exempt assets
• Any surplus income payments
• Any tax refunds that would be seized

If bankruptcy would yield $12,000 for creditors, your proposal must offer more than $12,000. This comparison is the foundation of every proposal; it’s the number creditors care about most.

2. Assessment of Available Income

Your LIT reviews your budget to determine what you can afford monthly. If you can afford $250/month, that becomes the starting point for structuring the proposal.

3. Evaluation of Non Exempt Assets ‑Exempt Assets

If you have $5,000 in non exempt assets, creditors expect that value to be included in the proposal. exempt assets, creditors expect that value to be included in the proposal.‑exempt assets, creditors expect that value to be included in the proposal.

Putting It All Together: A Real Example

Let’s say you have:

• $48,000 in unsecured debt
• $3,800 monthly take home income ‑home income
• $3,300 in necessary expenses
• $0 in non exempt assets‑exempt assets

Your available income is $500/month.

If bankruptcy would require you to pay $200/month for 21 months, creditors would receive $4,200.

To be accepted, your proposal must offer more than $4,200. But, acceptance is never guaranteed. Creditors can still counter or request adjustments, and your Licensed Insolvency Trustee helps negotiate that middle ground.

Your LIT might recommend:

• $250/month for 60 months = $15,000 total

This is:

• Affordable for you
• Significantly better for creditors
• Likely to be accepted

This is why consumer proposals reduce debt by up to 80%. The payment is based on what creditors would realistically recover, not the full amount owed. It’s a practical, numbers driven process designed to create a win win outcome: creditors recover more, and you get a manageable path forward.‑driven process designed to create a win‑win outcome: creditors recover more, and you get a manageable path forward.

Common Payment Structures and Terms

Consumer proposals are flexible. Your LIT can structure payments in several ways depending on your income, goals, and financial situation.

1. Monthly Payments (Most Common)

You pay a fixed amount each month for up to 60 months. Example:

• $15,000 proposal
• 60 months
• $250/month

2. Lump Sum Proposals‑Sum Proposals

If you have access to a one‑time amount: from family, a bonus, or selling an asset, you can offer a lump sum instead of monthly payments. Example:

• $10,000 lump sum
• No monthly payments
• Proposal completed immediately

3. Hybrid Structures

Some proposals combine a lump sum with monthly payments. Example:

• $5,000 upfront
• $150/month for 36 months

4. Term Length Options

The maximum term is 60 months, but shorter terms are allowed.

Here’s how term length affects payments:

Total Proposal Amount	36 Months	48 Months	60 Months
$12,000	$333/mo	$250/mo	$200/mo
$18,000	$500/mo	$375/mo	$300/mo

Longer terms = lower monthly payments.
Shorter terms = faster completion.

Your LIT will help you choose the structure that best fits your goals, whether that’s minimizing your monthly payment or completing the proposal as quickly as possible.

How Your Financial Situation Affects Payment Amounts

Your proposal is tailored to your unique circumstances. Several personal factors influence the final payment.

1. Income Stability

Stable income often results in:

• Lower payments
• Longer terms
• Higher acceptance rates

Irregular income (gig work, seasonal work) may require:

• Lower monthly payments
• Flexible structures
• Conservative budgeting

Your LIT will always structure your proposal in a way that protects you from over‑committing.

2. Household Size and Expenses

Larger households have higher allowable expenses, which can reduce your available income and lower your proposal payment.

3. Type of Debt

All unsecured debts can be included, but some influence the proposal differently:

• CRA tax debt often requires slightly higher offers
• Payday loans don’t affect the calculation much
• Student loans (over 7 years old) are treated like any other unsecured debt

4. Life Events and Income Changes

Your LIT considers:

• Maternity leave
• Job changes
• Health issues
• Reduced hours
• Seasonal fluctuations

The goal is to create a payment you can maintain comfortably.

The Negotiation Process with Creditors

Once your LIT files the proposal, creditors have 45 days to vote.

How Creditors Evaluate Your Proposal

They consider:

• Whether the offer is better than bankruptcy
• Your income and stability
• Your past payment history
• The likelihood you can complete the proposal

What Happens If Creditors Request Changes?

If creditors want a higher payment, your LIT negotiates on your behalf. Common requests include:

• Slightly higher monthly payments
• A longer term
• A small lump‑sum addition

You decide whether to accept the changes, nothing is forced on you.

What If Creditors Reject the Proposal?

This is rare. Your LIT can:

• Adjust the offer
• Re‑negotiate
• Explore alternatives

Most proposals are accepted because they offer creditors more than bankruptcy.

Payment Flexibility and Adjustment Options

Consumer proposals are designed to be flexible. Life happens and the system recognizes that.

1. Accelerated Payments

If your income increases or you want to finish early, you can:

• Make extra payments
• Increase your monthly amount
• Pay off the proposal in full anytime

There are no penalties for early completion.

2. Lump‑Sum Early Completion

If you receive:

• A bonus
• A tax refund
• Family support
• A settlement

You can pay off the remaining balance in one lump sum.

3. Payment Deferrals

A consumer proposal is only annulled if you fall three months behind, not simply if you miss three individual payments.

That means the rule depends on your payment schedule:

• If you pay bi‑weekly, missing three payments does not automatically put you three months behind.
• If you pay monthly, you can miss the equivalent of up to two full payments — but once you fall three months in arrears, the proposal is deemed annulled unless you’ve caught up.

The key is the time period, not the number of payments. Staying in touch with your Licensed Insolvency Trustee helps ensure you don’t accidentally cross that three‑month threshold.

4. Modification Options

If your financial situation changes significantly, your LIT can request a formal modification to:

• Reduce payments
• Extend the term
• Adjust the structure

This requires creditor approval but is often granted when circumstances are genuine. The system is built to help you succeed, not punish you for unexpected life events.

Conclusion

While the calculation behind consumer proposal payments may seem complex, the process is built to be fair, transparent, and tailored to your real life financial situation. A Licensed Insolvency Trustee ensures that your proposal reflects what you can reasonably afford, not what creditors wish you could pay. The result is a structured, interest free plan that reduces your debt and gives you room to breathe. A Licensed Insolvency Trustee ensures that your proposal reflects what you can reasonably afford.‑life financial situation. A Licensed Insolvency Trustee ensures that your proposal reflects what you can reasonably afford‑free plan that reduces your debt and gives you room to breathe.

A consumer proposal isn’t just a financial tool, it’s a path to stability, clarity, and a fresh start. And understanding how your payment is calculated is the first step toward feeling confident in your decision.

Contact Farber for a free, confidential consultation to receive a personalized assessment of your potential consumer proposal terms and monthly payment amount. Our Licensed Insolvency Trustees will walk you through the numbers, explain your options, and help you understand exactly what your proposal would look like based on your financial situation.