In a Canadian Consumer Proposal, you do not pay your Licensed Insolvency Trustee (LIT) directly out of pocket. As of June 2026, their fees are deducted directly from your agreed monthly payments to creditors, typically comprising federal setup tariffs and exactly 20% of the distributed funds.
Many Canadians hesitate to seek professional help for overwhelming debt because they fear they cannot afford the professional fees. Fortunately, the Canadian insolvency system is uniquely designed to protect debtors. If you are filing a Consumer Proposal in Ontario, Manitoba, British Columbia, or any other province, you will not face surprise invoices from your Licensed Insolvency Trustee.
The federal government strictly regulates how an LIT gets paid to ensure the process remains accessible. 💰 Instead of charging you thousands of dollars upfront, the trustee retains a portion of the monthly payment you are already making to your creditors. This system, established under the Bankruptcy and Insolvency Act (BIA), ensures that the professionals doing the work are compensated fairly without placing additional financial strain on you.
Understanding the BIA Tariff and the 20% Rule
When you file a Consumer Proposal, you are making a legal offer to your creditors to pay a percentage of what you owe. For example, you might offer to pay back $15,000 of a $50,000 debt over five years. The LIT’s compensation comes directly out of that $15,000. Creditors agree to this because recovering some funds through a highly regulated process is better than getting nothing in a bankruptcy.
The federal tariff outlines specific milestones for how these fees are calculated and disbursed. 📜 It is important to note that the LIT does not keep your entire payment. They are required to distribute the majority of the funds to your creditors according to a strict legal formula governed by the Office of the Superintendent of Bankruptcy (OSB).
| Fee Component | Amount (CAD) | When is it Deducted? |
|---|---|---|
| Filing Fee | $750 | Deducted from your first few monthly payments. |
| OSB Filing Fee | $123.17 | Deducted and paid to the Office of the Superintendent of Bankruptcy to register the proposal. |
| Approval Fee | $750 | Deducted once the proposal is officially approved by the court. |
| Distribution Percentage | 20% | Taken from the remaining funds before dividends are sent to creditors. |
| Mandatory Counselling | $170 ($85 x 2) | Deducted after you complete the two required financial sessions. |
Step-by-Step: How Your Payments are Handled
The flow of money in a Consumer Proposal is completely transparent and meticulously tracked. As a debtor, your only responsibility is to ensure your agreed-upon payment is made on time each month. The LIT handles all the complex accounting and distributions on your behalf.
Step 1: Establishing the Monthly Payment
During your initial consultation, the LIT will review your income and expenses to determine a fair monthly payment. 📅 If your creditors accept the proposal, this monthly figure becomes legally binding. You will set up an auto-withdrawal or make regular payments directly into the trustee’s federally audited trust account.
Step 2: The LIT Deducts Regulated Fees
Before any money is sent to your creditors, the LIT takes their legally permitted tariff fees. They will first recover the $750 filing fee, the $123.17 OSB filing fee, followed by the $750 approval fee and counselling costs. Once these base costs are covered, the 20% rule kicks in for the remainder of the proposal term.
Step 3: Distributing Dividends to Creditors
After the regulatory fees are deducted, the remaining balance is distributed proportionally to your unsecured creditors. 💳 This includes major credit card companies, banks, and even the Canada Revenue Agency (CRA) if you have outstanding tax debts. The LIT issues these dividends periodically, typically every six months or annually.
Step 4: Achieving Your Certificate of Full Performance
Once you have made your final payment, the LIT conducts a final audit of the trust account. You will then be issued a Certificate of Full Performance, which legally completely extinguishes the remaining balance of the debts included in your proposal.
How Much Does a Consumer Proposal Cost?
The total cost to you is simply the settlement amount you successfully negotiated with your creditors. The LIT fees do not increase your monthly payment; they only reduce the net amount the creditors receive.
- Example Scenario: If you agree to pay $300 CAD per month for 60 months, your total out-of-pocket cost is exactly $18,000 CAD.
- No Hidden Costs: You will never receive an unexpected invoice for “administrative extras” or “hourly billing” from a Licensed Insolvency Trustee.
- Tax Implications: The BIA mandates that applicable federal and provincial taxes (like HST/GST) are applied to the trustee’s fees, but again, these taxes are paid out of the $18,000 pool, not added on top of it.
How Long Does the Process Take?
Consumer Proposals offer a flexible timeline designed to fit your budget. 🕐 However, Canadian law strictly caps the maximum duration to ensure you are not tied to the process indefinitely.
- Maximum Term: A Consumer Proposal cannot legally exceed 60 months (5 years).
- Early Payoff: You can pay off your proposal early at any time without facing any financial penalties.
- Creditor Voting Period: After the proposal is filed, creditors have 45 days to vote on the offer.
- Court Approval: Following a successful vote, there is a 15-day waiting period before the proposal is deemed fully approved by the court.
Frequently Asked Questions (FAQ)
Does the 20% rule mean I pay 20% more on my debt?
No. The 20% is deducted from the settlement amount your creditors agreed to accept. If your proposal total is $10,000, you pay exactly $10,000. The trustee takes their 20% cut from that pool, meaning the creditors receive slightly less, but your cost remains unchanged.
What happens if my Consumer Proposal is rejected?
If creditors holding more than 50% of your debt reject the offer, your LIT will attempt to negotiate better terms. If an agreement cannot be reached, you are generally not responsible for the LIT’s filing fees out of pocket, though you will lose the legal protection of the stay of proceedings.
Can I hire a lawyer to lower the LIT fees?
No. Hiring a lawyer will not change the LIT fees because they are strictly set by the federal Bankruptcy and Insolvency Act. Engaging a lawyer would only add unnecessary legal expenses to your financial burden.
Are there any monthly maintenance fees?
No. There are no monthly maintenance or hidden administrative fees in a Consumer Proposal. The entire cost is covered by the BIA tariff structure, ensuring complete financial transparency for the debtor.
Does the CRA accept the 20% rule?
Yes. The Canada Revenue Agency is bound by the same federal BIA rules as any other unsecured creditor. If they vote to accept your proposal, they also accept that the LIT will deduct the standard regulatory fees from the tax dividend.
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