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MoneyTimes - July 23, 2013

Posted by Jill Kerby on July 23 2013 @ 12:00

INSOLVENCY PRACTITIONER REGISTER OPENS THIS WEEK SAYS INSOLVENCY SERVICE 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) this week. About 90 applications for these posts from solicitors, accountants and people engaged in financial service 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 what is still going to be a long journey of debt restructuring, repayment and discharge. (Go to www.isi.gov.ie/en/ISI/Pages/Registers ) 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. (Sorry about all the acronyms.) The people seeking, respectively, Debt Settlement or a Personal Insolvency Arrangements (DSAs and PIAs) for larger unsecured debts and debts up to €3 million 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 will accountants, some with corporate consultancies. There will be tax advisers, qualified financial advisers and mortgage brokers. (Too many of the latter having reinvented themselves as totally 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.” Instead the legislation only refers to the fact that the intermediaries preparatory work and on-going administration costs will be accounted for as part of the proposed debt arrangements. “The Personal Insolvency Act is silent on what might happen if the proposal is rejected at the creditor’s meeting” and the PIPs’ own proposal in relation to the payment of their costs and fees also becomes “redundant.” 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 without the assurance that the application will be accepted by the creditors. Even if upfront 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 to represent them. 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. But you need a game plan of your own: - Be clear in your own mind about your financial situation. Are you insolvent or are you bankrupt? - Provide the prospective AI or PIP with a concise record of your assets and liabilities and any history of debt negotiation with your creditors. PIPs are more likely to take on better-organised clients than chaotic ones. - 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 they convince their client to agree to a one-size-fits-all debt consolidation model that mainly involves split mortgages, not debt write-down. - If you succeed in hiring an intermediary, you’ll need to 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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