Choosing a PIP

The names of the first 40 or 50 personal insolvency practitioners (PIPS) to be so accredited by the Insolvency Service of Ireland have been published on that body’s website. For the 40 or 50 individuals concerned, it marks a not insubstantial achievement and commitment to the new personal insolvency regime.

When the new regime was first mooted it immediately prompted a massive level of interest on the part of all classes of professionals for whom the economic collapse had seriously diminished their earning power. Consequently, solicitors, accountants, financial advisors and – with no apparent trace of irony – mortgage brokers, all clamoured to see just what the requirements of the ISI would be.

But if these would-be PIPs were hoping for an easy route into what might prove to be a lucrative market, their hopes were to be disappointed because the ISI set the bar extremely high with a raft of requirements and conditions standing in the way of PIP wannabes. Among these are:

• Fitness and Probity: Declarations on suitability to pass Central Bank vetting.
• Professional qualification: Effectively, any individual wishing to become a PIP must have a professional qualification, typically as a member of an accountancy body, practicing solicitor, barrister-at-law or a Qualified Financial Advisor.
• Specific training: The applicant must supply evidence that they have completed a course on personal insolvency. Depending on their qualification, this can range from 2-10 days’ full-time attendance.
• Professional indemnity: the amount insured for each claim to be not less than €1 million and €1.5 million in aggregate.
• Tax clearance certificate
• Accountant’s report stating that the applicant has adequate systems and controls in place, especially with regard to ringfencing of client funds.
• Fees: €1,500 payable to ISI on registration, €1,000 per annum thereafter.

This is as it should be. The Irish personal insolvency scene can lay claim to be perhaps the most pervasive and complex anywhere in the world. This is not simply about relatively small sums run up on a credit card and a few personal loans. Rather, in many cases it is a fiendishly complicated web of personal and business debts against a multi-bank background, personal guarantees and creditors of all shades including those falling under “excluded” and “excludable” debts such as Revenue and local authorities.

It is not a business for the fainthearted and there is plenty of anecdotal evidence of personal insolvency course attendees failing to show for day two of their training once they became fully aware of the nature of the business.

And if there are major obstacles getting into the personal insolvency business, there are other substantial ones to getting out. For those granted the privilege to practice, major commitment is necessary. Among other requirements, anyone seeking to exit as a PIP must find another PIP to take on all current cases and also gain debtor consent for the changeover.

Against that background, most individuals will be reassured as to the competence and integrity of PIPs. But what other factors should a person considering appointing a PIP take into account?

One thing is geographic proximity. The legislation specifically requires that the PIP meet with the debtor/client at the very least in the early stages of the relationship. Much can be accomplished remotely, but the complexity of formulating a scheme in many cases will require a degree of hand-holding best achieved face-to-face.

This brings up the question of what type of profile the personal insolvency industry is likely to have. If the UK experience is anything to go by it points to the emergence of at least one substantial operator of scale seeking to dominate the Irish market.

But there are good reasons to believe that this “industrial” model is less suited to the more complex Irish market. (For example, in the UK the equivalent Individual Voluntary Arrangement system features cases of much smaller amounts than Ireland and exclusively deals with unsecured debt.)

Those who aspire to this kind of scale seek to operate a referral model, whereby accountants and solicitors who have existing insolvent clients will simply refer these clients on to the scale operator in return for a referral fee.

The dangers to these advisors sending individuals who presumably were once among their best clients – and could well be so again after the scheme runs its course – into the hands of an effective competitor, are clear.

Many debtors exploring the potential of the new regime to relieve them of their burden will in the first instance look to approach their existing advisors. Alternatively, those seeking to “find a PIP” have an option to access an online resource findapip.ie, which is a geographically-organized directory of PIPs around the country. These PIPs are members of StubbsGazette’s PIPx network which also allows member PIPs to refer clients to other suitable PIPs where a conflict of interest or other impediment to acting for that particular debtor arises.

The choice of PIP a debtor makes is critical. The ability of the PIP to negotiate skillfully with the creditors, including the PIPs ability to procure living expenses in excess of the minimum recommended level, will make a major difference to the debtor’s standard of living for up to six years.