Personal insolvency process: relief at what cost?

People entering the personal insolvency process to rid themselves of unsustainable debt have been told they can expect to be charged around €300 for an initial consultation, and several thousand euro to employ an intermediary to manage their case.

While fee rates have yet to be set for the new service, a leading practitioner warned “good professional advice has a price” and accounting bodies which are charged with operating the Government-approved scheme will be seeking to turn a profit.

Tom Murray, president of the Association of Chartered Certified Accountants (ACCA) Ireland, said ultimately "the market will decide" the level of fees charged by Personal Insolvency Practitioners (PIPs).

But he predicted an initial, hour-long consultation would be €250-€500, or an average of €300. To negotiate a deal with a bank would require substantial work, requiring anything from €1,000 to €3,000 or “it could be €10,000 for a significant entrepreneur with significant debts”. Then, there could be added costs of around €500-€700 a year for reviewing a settlement.

“PIPs are a business and that has to be remembered,” said Mr Murray, a partner in Friel Stafford. He stressed, however, that lawyers and accountants would not be flooding to register as PIPs under the Personal Insolvency Act.

The cost of registering and training for the position, as well insuring against claims, would make it difficult for anything but the larger law firms to manage the system.

He was speaking in Dublin at an information seminar yesterday organised by Free Legal Advice Centres (Flac) on how the various debt settlement schemes under the Personal Insolvency Act 2012 will operate.

Paul Joyce, policy analyst with Flac, said there was no ban on PIPs charging fees up-front, and there should be a form of legal aid for people who were blocked from entering the process.

About 150,000 mortgages are in arrears of more than 90 days, affecting up to 500,000 people, according to the Insolvency Service of Ireland.

The Government has estimated about 18,000 people will apply for personal insolvency schemes in first year but industry estimates put it at 25,000-40,000, excluding up to 7,000 bankrupts.