Choosing a PIP

New government-backed insolvency schemes seem to offer relief to the heavily indebted – but first the debtor has to choose a Personal Insolvency Practitioner to represent argue their case.

After what seems like years of waiting, the first designated Personal Insolvency Practitioners have been approved by the Insolvency Service of Ireland (ISI) and the Service begins taking applications from PIPs on behalf of distressed debtors on 9th September.

For those debtors waiting for relief, the moment comes not a second too soon. The ISI expects there to be just a trickle of initial applicants as the number of PIPs reaches critical mass, but this is also because debtors will take their time familiarising themselves with the new system before committing to a scheme. And for many, the first big decision is choosing a PIP to manage their case.

The choice of PIP a debtor makes is critical. It is the PIP who will negotiate with the debtor’s creditors and attempt to get a write-down of their debts to a sustainable level. The PIP will also try to procure reasonable living expenses for the debtor after the revised monthly debt repayments have been agreed. While the ISI has issued minimum recommended expenses for debtors, there is latitude for the PIP to procure levels in excess of the minimum depending on their powers of persuasion. This could make a major difference to the debtor’s standard of living for the lifetime of the scheme (up to six years).

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 requirements the ISI would demand from those who would be a PIPs.

And 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. There is a raft of requirements and conditions standing in the way of PIP wannabes, including Central Bank vetting, the need for a professional qualification, training and exams, professional indemnity, tax clearance, new systems and software and a raft of fees payable to the ISI.

This is as it should be. The Irish personal insolvency scene is perhaps the most complex in the world. 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.

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 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.

While the UK personal insolvency business has seen the emergence of large scale operators there is good reason to believe 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 – this requires less intensive debtor-PIP interaction.

Indeed there are indications from both the ISI and, crucially, creditor banks, that they are more comfortable with local PIP-debtor arrangements than the more anonymous UK-type model. This is on the grounds that there is more PIP familiarity with what is in every case a unique and often complex debtor situation.

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, a geographically-organized directory of PIPs around the country, all of whom are members of the PIPx network. This platform allows the debtor to browse through qualified PIPs and choose one in the locality and/or who they feel best meets their needs. From there, the debtor can fill in a simple registration questionnaire and quickly discover whether they qualify for a scheme.

Given the stakes, and the fact that the relationship will last for a number years, the PIP decision is a critical one for the debtor’s financial and psychological well-being.