Money Express with Jill Kerby: Insolvency services up and running

The first names of authorised intermediaries (AIs) and personal insolvency practitioners (PIPs) should be appearing on the intermediary registers of the Insolvency Service of Ireland (ISI).

The first names of authorised intermediaries (AIs) and personal insolvency practitioners (PIPs) should be appearing on the intermediary registers of the Insolvency Service of Ireland (ISI).

About 90 applications for these posts have been received so far by the ISI, though not all will pass their “rigourous” qualification requirements.

Nevertheless, people who are in serious debt who need such an intermediary to act on their behalf in preparing their insolvency application to their creditors, can now – finally – take the first step in a long journey of settling their debts.

The debtor with less than €20,000 worth of unsecured debt (credit cards, personal loans, HP, utility arrears) and limited means will be applying for a Debt Relief Notice (DRN) and will be supervised for three years by AI who may be a money, advice budgeting service (MABS) official.

The people seeking, respectively, Debt Settlement or a Personal Insolvency Arrangements (DSAs and PIAs) for larger unsecured debts and debts up to €3m including secured loans like mortgages will need to engage a PIP.

And this is where difficulties may arise.

While MABS has a 20 year track record of dealing with relatively low level of indebtedness, the PIP is an entirely new category of intermediary.

Some will have legal backgrounds. Others accountants, some with corporate consultancies. There will tax advisers, qualified financial advisers and mortgage brokers. (Too many claim to be unregulated personal debt managers.)

Unfortunately, the new insolvency legislation is not specific about they way PIPs should be paid.

The expectation is that PIPs will be remunerated - for preparing the credit application, arranging the creditor meetings and if accepted, the supervision of the debtor for the five or six years of the arrangements - from the pool of money that will repay all the creditors. Upfront fees, however, can and most likely will be demanded by some PIPs to cover their initial preparation of the creditor’s proposal during the 70 day ‘protective certificate’ period when your creditors cannot take any legal action against you.

“There have been some ambiguous soundings…on the question of whether upfront fees [to PIPs] …will be allowed under the legislation,” says FLAC, the Free Legal Aid Centres. “Our reading…is that the question is not specifically addressed”.

According to FLAC, “some practitioners plan to charge a consultation fee of several hundred euro and preparatory fees of thousands,” to ensure they are paid. Such PIPs may end up only taking on cases where the debtor can afford their fees.

Even if up-front fees were to be banned, there is no assurance that small debtors, especially those whose efforts to renegotiate arrears another debts under the MARP or debt code of conduct process, would find a PIP. Instead, FLAC and MABs are calling on the ISI to set up a panel of insolvency intermediaries who will be directly employed by the service with remuneration paid directly to the ISI.

Until then, says FLAC, “our long-awaited personal insolvency legislation may be in danger of falling at the first hurdle.”

The names of AIs and PIPs should be available on the registers this week. If you contact one, check their background. A person with a good track record of dealing with informal personal insolvency is the best option.

Provide the prospective AI or PIP with a concise record of your assets and liabilities and debt negotiation with your creditors. Ask about up-front fees. If they aren’t charged, ask why. Another concern is that the bank creditors may allow PIPs to take a higher share of the agreed pool of money to creditors in year one if the client agrees to a one-size-fits-all debt consolidation model involving split mortgages, not debt write-down.

If you hire an intermediary, you must pay the ISI €100 in for a DSN protective certificate, €250 for a DSA cert and €500 for a PIA cert.

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