With the downturn in the economy we are hearing every day about the huge numbers of people who are struggling to meet unsustainable debt. Recent figures suggest that there are close on 100,000 mortgages which are deemed to be in “serious arrears”, in other words, they have been in arrears for 90 days or more.
Also topical in the news and particularly this week has been the Insolvency Service’s acceptance of applications under the Personal Insolvency Act 2012. The service began last Monday and many of you will be familiar with the various news articles that have been circulating back and forth since then.
An issue which people have serious concerns about is costs and fees.
So how much would you have to pay your PIP to help you in entering an Insolvency Arrangement?
As this is a Statutory Scheme, there is provision in the law which states that the fees paid to the PIP are to be accounted for as part of the overall Arrangement. This means that the fees that the PIP would be paid will generally come from the amount of money left to deal with the debts once the borrower’s reasonable living expenses have been taken from the income that they earn. So what is the problem?
The difficulty lies in the work that needs to be done to prepare a case for an application before the PIP is officially appointed. A problem also arises in situations where an Arrangement may be put up to the creditors who reject it.
Much work is involved in preparing an application for a Protective Certificate to the Insolvency Service of Ireland and dealing with creditors in order to get an Arrangement approved by them.
PIP’s may require payment upfront for this work and this is where difficulties arise for cash starved debtors.
Where PIPs are dealing with cases where somebody has little/no income this limits the proposals that can be put forward in dealing with both the creditors and also for the PIP’s fee. In these circumstances, proposals for an Arrangement will also have to include a fee to be paid to the PIP on an instalment basis for work done pre-submission.
In cases where even an instalment arrangement is not possible or the Arrangement is rejected then it will be a matter for each individual PIP whether they are prepared to take on the work.
It has been suggested that the new regime will only help those who are the “rich poor” and who can afford the relevant fees. This should not be the case. The government should be seeking to help those through the current system of legal aid if their financial situation is such that the only reason they cannot enter into these arrangements is because they can’t meet initial payments.
One of the ways to deal with this situation is to lobby to introduce a provision in the Scheme which will deal with such hardship cases.
In such a scenario, as a PIP, I see no reason why a fast-track procedure cannot be put in place by the Insolvency Service of Ireland to deal with such cash debtors. This would have the effect that these applications would be processed more efficiently and with less cost and therefore, reduce the number of cases that would require State subvention.
Such a facility would increase the chances of the Statutory Scheme working for all.
It is very important that anybody considering personal insolvency would speak to their PIP and clarify the issue of costs with them. The PIP is obliged under the law to issue details on how their fees will be charged from the outset.
I am having an Insolvency Information Week this week, which will include a free seminar in Raheen House Hotel, Clonmel, this evening (Thursday, 19th September) at 7.30pm – 9pm.
The seminar will focus on how the new Insolvency Arrangements will help people return to solvency and help all the sectors of the Economy to return to normal.
Anyone who registers for the seminar will receive a free consultation in our office until tomorrow (Friday). To register Freephone 1800 750 850.
