# Obliged to try a PIA?



## Outsider (12 Dec 2016)

"You must swear an Affidavit stating that you have made reasonable efforts to make use of the alternative arrangements to bankruptcy such as DSA or PIA"

If there is no financial benefit to do so why would someone opt for a 5 (or more) year PIA versus a 3 year bankruptcy?
What if I don't agree to the terms of the PIA?
Can I be "forced" into a PIA?

And what constitutes "reasonable effort"?


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## TLO (12 Dec 2016)

Outsider said:


> If there is no financial benefit to do so why would someone opt for a 5 (or more) year PIA versus a 3 year bankruptcy?



With a PIA you normally get to stay in the family home.  With bankruptcy the status of the family home is less clear.  btw, bankruptcy is now 1 year.



Outsider said:


> What if I don't agree to the terms of the PIA?
> Can I be "forced" into a PIA?



Nobody can force you into a PIA.  Your PIP attempts to put one in place on your behalf.  



Outsider said:


> And what constitutes "reasonable effort"?



As part of applying for bankruptcy you ask a PIP to review your circumstances to see if you are suitable for a DSA or a PIA.  In many cases, the review finds that income is below RLEs making a DSA/PIA not feasible.


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## Outsider (13 Dec 2016)

Thanks.
I'm referring to a scenario where there is no family home.
I'm aware of the one year bankruptcy but there would still be an income order lasting 3 years (still preferable to a 5 year PIA imo)



TLO said:


> Your PIP attempts to put one in place on your behalf.



This is the part I don't get.

*What if you don't want the PIP to put one in place for you?
*
What would be deemed a "reasonable effort" at a PIA?
What's the minimum one would need to do before being allowed enter the bankruptcy process?


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## TLO (13 Dec 2016)

PIAs are designed with the family home in mind.  If your debt is unsecured, in other words, you don't own any property, then a DSA would be the route to go.  You could ask your PIP to design a DSA that is more favourable to you than bankruptcy would be, i.e. keep half the surplus over RLEs, 2.5 year term etc.  If it passes the DSA creditors meeting then you have a better outcome than bankruptcy.  If it fails to pass the DSA creditors meeting then you (or your PIP) can safely swear an affidavit that a "reasonable effort" to get a DSA passed was made, and proceed with your bankruptcy application.


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## Jim Stafford (13 Dec 2016)

Outsider said:


> What's the minimum one would need to do before being allowed enter the bankruptcy process?



Your posting obviously relates to the necessity to obtain a letter from a PIP which has to form part of a self-adjudication bankruptcy application.  Such PIP letters are required by the High Court and should include wording to the effect of the following:

_I say that I fully reviewed Mr. X’s situation with him and considered the extent to which his circumstances would permit him to enter a Debt Settlement Arrangement or a Personal Insolvency Arrangement or to make a proposal for such arrangements. I say that I have concluded, based on a full assessment of Mr. X’s financial situation, that his circumstances do not permit him to enter such an arrangement_.

The reality of the situation is that some firms of solicitors, who had been paid to assist a debtor to go bankrupt, had sent their clients to us to obtain a PIP letter.  In some of those cases we determined that we were unable to provide such a letter as we were of the opinion that the debtor could either achieve a PIA or DSA.

Whilst every case is different, the minimum required for a PIA/DSA is probably at least  €300 a month surplus over the RLE's and/or a lump sum.  Some of the lump sums can be as small as €5,000.



Outsider said:


> What if you don't want the PIP to put one in place for you?



If the PIP decides that a PIA/DSA is achievable, then he will not provide you with the PIP letter for the bankruptcy.


Jim Stafford


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## Outsider (14 Dec 2016)

Jim Stafford said:


> If the PIP decides that a PIA/DSA is achievable, then he will not provide you with the PIP letter for the bankruptcy.



Jim/TLO
Assuming a hypothetical situation whereby the applicant cannot get a PIP to provide a letter, the applicant is then "forced" to avail of a PIA?
A bankruptcy is not something most people would enter into lightly but it at least provides certainty to the individual.
A PIA on the other hand carries the constant worry of things going awry. It can fail - but it might be through no fault on the part of the individual e.g. ill health, loss of work.

Is this not very unfair?


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## Jim Stafford (15 Dec 2016)

Whilst I believe we have one of the fairest regimes for dealing with unsustainable debt, it is clear that no regime can be perfect for both the debtor and the creditors.

There are still real issues with the legislation, which I have highlighted on this forum previously.  One of the big issues is that some PIPs are not authorised to implement informal schemes, and therefore they "force" debtors to down what can be a costly and stressful PIA/DSA route, which can lack the flexibility of an informal scheme.

As a firm, we have, unfortunately, encountered scenarios where creditors have tried to impose conditions in a PIA/DSA that would lead to its failure in due course.

As a firm, we will initially try, in most cases, to  do an informal scheme.  If the creditors try and impose unreasonable conditions, then we can sign off on a PIP letter to support a bankruptcy application if necessary, safe in the knowledge that the creditors were being unreasonable in their conditions. 

A PIA/DSA can incorporate provisions dealing with short term illness or loss of work.  In addition, a PIP can "vary" the proposals if there are material changes in the debtor's circumstances.

In  conclusion, whilst the Irish regime can be improved (specifically by allowing all PIPs to do informal schemes and lifting the €3 million cap on PIAs) it is a regime that works for many debtors.

Jim Stafford


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## Outsider (15 Dec 2016)

Jim Stafford said:


> In some of those cases we determined that we were unable to provide such a letter as we were of the opinion that the debtor could either achieve a PIA or DSA.



Jim
The idea of "achieving" a DNA/PIA for debtors  seems like a contradiction in terms given that the process seems stacked in favour of banks/creditors.
Surely there is some sort of moral obligation not to deny people the opportunity to wipe the slate and make a fresh, stress-free start. A fundamental need of those wishing to go bankrupt is certainty and PIAs/DNAs in their current guise do not provide anything like the same level of certainty as provided by the bankruptcy process. 
PIAs can fail through no fault on the part of the debtor. I accept that it is impossible to draft "perfect" legislation but this is simply unjust. It is a ridiculous anomaly with potentially ruinous consequences for debtors and until such time as the legislation is amended to correct it people should not be pushed in that direction.
Just my tuppence worth.


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## Outsider (18 Dec 2016)

Jim Stafford said:


> In some of those cases we determined that we were unable to provide such a letter as we were of the opinion that the debtor could either achieve a PIA or DSA.



Jim

Prior to this I had always considered bankruptcy to be rock bottom.
I'd really appreciate some example of a scenario wherein a person will probably not be allowed avail of the process.


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## Jim Stafford (19 Dec 2016)

As I have stated above, every case is different. The minimum required for a PIA/DSA is probably at least €300 a month surplus over the RLE's and/or a lump sum. Some of the lump sums can be as small as €5,000.

Jim Stafford


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## Outsider (19 Dec 2016)

Jim
I appreciate you taking time to reply but with respect you are not addressing the points I am making.

My understanding is that bankruptcies provide certainty not afforded by PIAs/DSAs.
Is this not the case?

You have said above that you refused letters to people in the past.
Can you give an example - or even a rough idea - of the reasoning which might have prompted you to send a debtor down the PIA/DSA route when it was not the one preferred by the debtor?


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## Jim Stafford (19 Dec 2016)

Outsider said:


> My understanding is that bankruptcies provide certainty not afforded by PIAs/DSAs.
> Is this not the case?



It is the case that bankruptcies provide more certainty about debt write off.  However, they can also create uncertainty as to whether the bankrupt can borrow again, will he be subject to disciplinary action by a regulatory body, will he be allowed to work in financial services etc.

The real focus should be on trying to reach a deal with creditors.

The reasoning as to why a PIP might not be able to sign off on a letter to the High Court might be because of the Practice Direction issued by the High Court, as outlined above.  If a PIP is of the opinion that a PIA/DSA is achievable, then he should not sign a PIP letter to the High Court supporting a bankruptcy. There are many factors that a PIP needs to consider in determining what is "_achievable".
_
We have only had a handful of cases where the debtor was initially  unhappy that we would not provide a PIP letter, but when we explained why they understood.  For example, one of those cases was where a debtor had transferred unencumbered property, including the family home to his wife, just months previously. He wanted to go bankrupt as he thought it would solve all of his financial problems.  When it was explained to him that the transfers would be overturned by the Official Assignee, he understood that it would not be wise for him to go bankrupt. In that particular case we were able to subsequently negotiate an informal arrangement with his main creditor.

As I have mentioned before, every case is different.

Jim Stafford


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## Outsider (19 Dec 2016)

Thanks Jim.

Notwithstanding the example you give above I think it's not unreasonable to assume that the average person who wishes to go bankrupt will have considered the negative implications and will have done all the maths.

I wonder if the naive (if we're being honest) individual you mention above fully understood the implications for him and his family if he were to suffer a stroke mid-PIA.

Could safeguards have been built into the PIA to protect him and his family?
Or would his position revert to that which pertained pre the PIA?


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## Jim Stafford (20 Dec 2016)

Outsider said:


> I wonder if the naive (if we're being honest) individual you mention above fully understood the implications for him and his family if he were to suffer a stroke mid-PIA.



In the case of the individual I referred to, we did an informal scheme for him as opposed to a PIA.  If he had done a PIA and became seriously ill and unable to work during the PIA then the scheme would have failed, and his financial position would be back to square one.

One possible safeguard to put in place would be to allow the debtor to take out a critical illness policy which would pay out in the event of sickness.  Some self-employed people have such policies. I imagine that creditors would object to a "new" policy being put in place, as the premiums are expensive etc.  Once again, everything depends on the specific facts and circumstances of each case.

Jim Stafford


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