Consumer Proposal Payout



For most Canadians, if not the world at large, the new decade has been somewhat of a shock. No one could have predicted covid-19 and the devastating impact it would have on our economy. 

Even before the pandemic, things were shaky, economically for a lot of Canadians; for every $1 a Canadian earned, $2 was owed in debt. With the lockdown of the economy, this debt is expected to rise.

Debt can come in many forms from student loans, bad financial decisions, unfruitful investments, unemployment, illness or divorce bills – the list is endless. With the pandemic, people are understandably nervous, and some are tittering on the verge of bankruptcy. 

Bankruptcy seems like the only way out of a long and burdensome road of debt, but it does not have to be this way. Bankruptcy is not the only option – a Consumer Proposal Payout could be the way out.

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What is a Consumer Proposal Payout?

A Consumer Proposal Payout is a financial compromise agreement you enter into with your creditors to pay off a certain proportion of your debt, with the rest forgiven. It is an alternative to bankruptcy and helps ease some of the pressure from loan sharks chasing you up for payment. 

Multiple debt is consolidated into one loan and a manageable monthly instalment is agreed to pay this off over a period of time, typically around 3 to 5 years.

This form of debt relief gives you the time and space to get back on track.


What Debts can be included in a Consumer Proposal Payout?

All forms of unsecured debt can form part of a consumer proposal payout.  Unsecured debts are debts that are not backed by an asset you may own such as a residential home. 

Examples of unsecured debt that can be included in a consumer proposal payout are income taxes, credit card debt, personal loans, student loans, medical bills, utility bills etc. A consumer proposal payout cannot be used for your mortgage or automobile loans.  Please note that a consumer proposal payout can only be used to repay a student loan if you have been out of education for more than 7 years.


Consumer Proposal Payout versus Bankruptcy

Both a consumer proposal payout and filing for bankruptcy provide debt relief and the opportunity for you to start over again. However, in order to qualify for a consumer proposal payout, you cannot have more than $250,000 of debt, whereas for a bankruptcy, there is no maximum threshold.  

On the plus side, filing for a consumer payout protects your assets from creditors.  You payback a fixed monthly sum that you can afford with no interest and if you exit your consumer proposal early because you have paid it in full, this has a positive effect on your credit ratings, making it easier for you to get back on track financially and start building up your credit history again. 

Another benefit of filing for a consumer proposal payout as opposed to a bankruptcy is that you keep any tax refunds you receive unlike a bankruptcy where you lose your tax refund for the year you file.

Other benefits of opting for a consumer proposal is that you are offered financial counselling with a professional who will help you set up a feasible financial plan that you can stick to and offer advise on how to rebuild up your credit rating.

Bankruptcy on the other hand could result in your assets being sold to pay off your debt. In addition, unlike a consumer payout proposal, you cannot pay off your debt early, consequently making it difficult to start a fresh and get back on track, financially.

In addition, there is still a stigma to having been bankrupt and it can be viewed as a barrier to moving forward and starting all over. In some professions, bankruptcy can negatively affect your employment opportunities in future.

User Case Study

Below is a simple illustration of why consumer proposal payout is often a more attractive debt relief option.

In this example, a consumer owes $25,000 in debt. The 4 different debt relief solutions offered shows the fixed monthly instalments over 5 years and the corresponding amounts paid and saved in total over the agreed term.

To Eliminate Your Debt

Monthly Payment (approximate)
Over 5 Years

Total Cost
Over 5 Years

Total Savings
Over 5 Years

Consumer Proposal
Pay Less than Principal Debt Amount




Credit Counselling
No Principal Reduction




Debt Consolidation
Added Interest Costs




Repay Debt on Your Own
Added Interest Costs





As shown above, by opting for a Consumer Proposal, you only pay back $8,750 of a $25,000 debt over 5 years; consequently, saving you $16,250!  

Compare that to debt consolidation or a personal repayment plan and you pay back between $33,366.67 and $38,090.14, which is between 1.33% to 1.52% MORE than the original debt of $25,000! Both options leaving you $8,366.67 and $13,090.14 worse off, respectively.


How do I set up a Consumer Proposal Payout?

You can only file a consumer proposal through a Licensed Insolvency Trustee (LIT) such as Morgix Mortgage Solutions. They will negotiate with your creditors, on your behalf, to pay off an agreed portion of your debt in fixed monthly instalments over 3 to5 years. This is paid over this period of time and they, in turn, will pay your creditors.

No upfront fees are paid to Morgix when you file a consumer proposal. The fees are part of the fixed monthly payments as they are included in the proposal











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