trustee or not in a consumer proposal?
Question: There are companies that specialize in consumer proposals that charge fees to prepare your consumer proposal and guide you through the process working on your behalf. They are not trustees and claim that trustees work on behalf of the creditors while they work on behalf of you… my understanding is that a trustees fees are not paid by the debtor but instead come out of the funds from the proposal?
Answer: You are correct. To administer a consumer proposal you must be licensed by the federal government of Canada, and one of the conditions of that license is that the proposal administrator receives a fee set by the government. All administrators receive the same fee, and it is paid out of the proceeds of the proposal, so, in effect, it is the creditors that are covering the cost of the proposal.
You can hire an advisor to help you through the process, but in most cases it’s not necessary. The administrator is required by law to inform you of all of your options and to help you through the process, so in most cases it is pointless to pay someone else, who is not regulated by the government, to help you.
Most proposal administrators are licensed bankruptcy trustees, and therefore are subject to continuous review by the government to ensure that they are meeting all requirements set out by the law.