# Isn't bankruptcy better than a PIA?



## Outsider (16 Jan 2017)

In another thread on here Brendan Burgess urges a poster to go bankrupt as soon as possible "before business picks up and the PIP starts investigating a PIA."

This is a crazy state of affairs!

In its current guise a PIA can fail through no fault on the part of the debtor. 
(e.g in the event of personal misfortune - job loss, ill-health etc.)

*Bankruptcy does not carry this risk!!!*

How crazy and immoral is it that a person can be forced into the PIA process when it is so fraught with risk!???

Can anyone on here - PIP or otherwise - justify imposing a PIA arrangement on applicants thereby denying them the certainty, security and peace of mind that is offered by the bankruptcy route?


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## TLO (17 Jan 2017)

Nobody imposes a PIA on you.  It is something that you apply for.  Bankruptcy differs, in that either the debtor or a creditor can apply for it.  

The insolvency regime is designed with moral hazard in mind.  If a PIA is more appropriate then that is the moral and legal route that you should go.  If a PIA fails mid-term then bankruptcy becomes more of a possibility.

A PIA is preferable in many cases, particularly where there is a desire to retain the family home.

Lump sum PIAs, where a friend/family member puts up a lump sum, are also attractive because the term can be specified to match the standard bankruptcy term of 1 year.


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## Outsider (18 Jan 2017)

TLO said:


> Nobody imposes a PIA on you. It is something that you apply for.



And what  if I want to go bankrupt and the PIP refuses to sanction it and says a PIA would be a more "suitable" option?
What option is left to me then?
Is this not the same as being forced to do it?



TLO said:


> If a PIA fails mid-term then bankruptcy becomes more of a possibility.



So after 4 years a PIA might fail and you're back to square one.
Why should anyone be forced into such a ludicrously uncertain process against their will?


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## TLO (19 Jan 2017)

Unfortunately, if you are insolvent you become forced into doing many things against your will.  Not saying that it's completely fair, in your case maybe it isn't, but the insolvency regime that we have is very unlikely to be changed further.   You need to work within the current rules.

It sounds like your income is above RLEs and that and that the surplus makes a PIA a possibility.  Is there any way that you could reduce your income?  12 month career break?  Work part-time?  That way a PIP could justify saying that you aren't suitable for a PIA, leaving the door open for you to petition for your own bankruptcy.


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## Outsider (19 Jan 2017)

TLO. Thanks for the advice but I think you are missing my point.
The legislation was not written with a view to forcing people in difficulty into even worse difficulty.
That was not its purpose.

Was not the original purpose of the Personal Insolvency Act to provide a better alternative for people who were facing bankruptcy?

From the KBG website -
"The Act introduces three insolvency procedures to hopefully enable individuals in difficulties resolve their debt issues without having to resort to becoming bankrupt."

PIPs more than anyone must surely know this.
Their unwillingness to comment on the issue (on this site at least) is odd don't you think?


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## Jim Stafford (20 Jan 2017)

The issues you raise in this thread have already been discussed in the other thread that you raised:

http://www.askaboutmoney.com/threads/obliged-to-try-a-pia.201707/

Jim Stafford


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## Outsider (20 Jan 2017)

Jim
With respect neither you nor anyone else has yet provided answers to these questions.


Was not the original purpose of the Personal Insolvency Act to provide a better alternative for people who were facing bankruptcy?
Have there been instances where PIPs blocked a debtor from going bankrupt and recommended a PIA instead where there was little or no material benefit to the debtor?
Is it appropriate that PIPs have a say in the feasibility of PIAs given that the PIPs themselves have a vested interest in the process?


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## Bronte (20 Jan 2017)

1. That was my understanding. But the insolvency website and service turned out to be a bit of a joke really. In my opinion. I was very disappointed for the many posters on here when I realised how awful it was. I actually gave up, I just hope things are better now. I reckon most people at the time should have just skipped off to Englsnd, one year or so of hell instead if a decade.

The whole point was to sort out the mess for people.
2. Interesting question, but I've no clue. And no poster in this field on here will admit to that.

3. Can you explain this more fully please. An example perhaps.


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## Outsider (20 Jan 2017)

Bronte 
PIPs are the arbiters when it comes to deciding whether or not a PIA should be pursued. 
Since the PIPs are the the very people who make money from PIAs is it not a ludicrous conflict of interest that they get power of veto in these matters?


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## breakonthru123 (29 Jan 2017)

I am not a PIP but a person who plans to enter bankruptcy soon along with my wife.

My opinion based on info gathered thus far is that the IMHO will get you a signed statement (for free) indicating that their external PIP has evaluated your finances and declared that routes other then bankruptcy are not viable BUT ONLY if your sole asset is the family home.

The following is my conjecture - if the 'bankrupt to be' has more assets than the family home then in my opinion - the IMHO PIP (and all other PIP's) require payment to financially 'audit' your affairs and essentially investigate whether you'be been squirreling away cash in advance of the adjudication date.

At the end of the day the Official Assignee requires impartial professional evidence that the folks facing bankruptcy have indeed less money then the debts they face - and - are not sitting on a pile of cash to ease them through the bankruptcy.

Hence our own need to have our bank statements squeaky clean for three full calendar months prior to entering bankruptcy and also to show during that period that we're under the RLE's to avoid payment orders.


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## Outsider (30 Jan 2017)

No offence intended Breakonthru but your points don't quite address the issues I'm trying to address on this thread.

The main point of the thread was the unfairness/inadequacy/failings of the Insolvency Service protocols.(see post #7)

The fact that no PIP has yet been able to give a straight answer to what are very straightforward questions says a lot.

I hope my reply doesn't seem impolite. That is most certainly not my intention. I'm just fed up at the lack of answers on the issues I have raised.


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## Jim Stafford (31 Jan 2017)

Outsider said:


> Jim
> With respect neither you nor anyone else has yet provided answers to these questions.
> 
> 
> ...


The Personal Insolvency Act was brought into law by the legislature, who in turn were voted into power by the people of Ireland.  The Act had to protect the rights of debtors *AND* creditors.  It is not a perfect Act, as I have previously mentioned on this forum, but it has helped many people.

PIPs are professionals, who have received specific training and have passed a PIP exam.  They had to have certain basic qualifications before even applying to become a PIP.  All PIPs are regulated by the ISI. They receive regular monitoring visits during which their systems and files are rigorously checked.  They also have to attend compulsory CPD courses etc.  As professionals, they have to obviously comply with the law.

Of course it is appropriate that PIPs have a say in the feasibility of PIAs.  Not only do PIPs have a say, the creditors also have a big say, as do the courts when the PIAs are presented to them for approval.

It is absurd to suggest that a professional would compromise his professionalism and integrity and recommend a course of action that did not comply with the legislation.  To use an extreme analogy, if a brain surgeon is reviewing all of the diagnostic tests that he has ordered on a patient, and concludes that the patient only needs an aspirin and some rest, do you really believe that he would recommend brain surgery because he needs a fee of ,say, €10,000?   PIPSs are not brain surgeons, but are financial surgeons. They should  be slow to recommend a bankruptcy if another solution is viable.

Jim Stafford


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## Dr.Debt (31 Jan 2017)

Well, I'll answer your question  (as a former PIP) 

For two years I assisted numerous clients to obtain settlements with their creditors through informal arrangements.When it became clear that I could not continue with this work without getting further regulatory approval from the central bank, I decided to discontinue.
This was due to pressures of other work and also due to disenchantment with the operations of the Insolvency Service.
In my view, the insolvency framework is inadequate in its approach, offering only FORMAL arrangements whereas most of my clients
circumstances were clearly more suited to INFORMAL ARRANGEMENTS.

Your grievance is that you cannot file for bankruptcy without first getting a clearance letter from a PIP. I think this is a very sensible provision of the legislation. Quite simply the legislation is seeking to strike a balance between the interests of the debtor and the creditor. If a debtor has surplus income, above the level of Reasonable Living Expenses, then the debtor is expected to repay his creditors with this surplus income over a period of time through an arrangement. I believe this to be a fair and reasonable approach. If the debtor has no surplus income. above reasonable living costs, then no PIP is likely to object to the provision of a clearance letter for bankruptcy..

This is not about a conflict of interest with the PIP. From my experience, there is more money to be made, by the PIP by taking the client through bankruptcy than through a formal arrangement. At least the fee as a function of time spent will be greater.

If you are genuinely "bust" with little means or income, then bankruptcy is freely available to you. If you have income in excess of reasonable living expenses, then bankruptcy may not be available to you and that's the way it should be.


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## Outsider (31 Jan 2017)

Dr.Debt said:


> If a debtor has surplus income, above the level of Reasonable Living Expenses, then the debtor is expected to repay his creditors with this surplus income over a period of time through an arrangement. I believe this to be a fair and reasonable approach.



I'm not sure why you are inserting this straw man into the debate. No one is arguing otherwise.



Dr.Debt said:


> If you have income in excess of reasonable living expenses, then bankruptcy may not be available to you and that's the way it should be.



This statement is utterly bogus!
Having surplus income has never been a disqualifier for bankruptcy and is provided for in the bankruptcy legislation.

*85D.— (1) The Court may,... make an order requiring a bankrupt to make payments to the Official Assignee or the trustee in bankruptcy from his income or other assets for the benefit of his creditors (a ‘bankruptcy payment order’).
(4) ...) the Court shall have regard to the reasonable living expenses of the bankrupt ... and the Court may also have regard to any guidelines on reasonable living expenses issued by the Insolvency Service under the Personal Insolvency Act 2012.*


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## Dr.Debt (31 Jan 2017)

OK Lets take this in smaller steps, if you wish..................

If a PIP, having reviewed your financial circumstances forms an opinion that there is a reasonable chance that a formal arrangement will be accepted by your creditors, he or she will be unable to give you the necessary letter of clearance necessary for bankruptcy.

If your income (per month) is such that it exceeds RLE by say €300 or more, then it might be considered reasonable for a PIP to expect that a formal arrangement will be accepted by the creditors. Therefore it is a fact that the more your income exceeds RLE, the less chance you have of getting a clearance letter from a PIP

That is why I say in my previous post - "If you have income in excess of reasonable living expenses, then bankruptcy may not be available to you" There is nothing bogus about this at all. Its the law of the land.

I'm sorry that you are angry about it. That's the law. Its clearly cited in the insolvency legislation. A PIP will always need to justify his actions in any case.


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## Outsider (31 Jan 2017)

I am very well aware that it is the way the law is written but you are utterly abusing the spirit of the law in interpreting it the way you are.
As a PIP you know very well that the original point of the insolvency legislation was to provide potential bankrupts with a better solution.


From Justice Baker's ruling  http://www.courts.ie/Judgments.nsf/...be16dad29dce715080257f6f005b2a6a?OpenDocument

*"39. Thus the Oireachtas requires the court to consider whether the personal insolvency route would offer a more beneficial solution in the light of the desire that the debtor be permitted to continue to participate in economic activity. If the personal insolvency solution is reasonably available to a debtor he should be given time to explore that option."*

Further down she says:*"unfortunately I can see no means by which I can adjourn the proceedings to permit him to avail of the more benevolent personal insolvency arrangement"*

It is clear from her sentiments expressed here what the point of the new protocols were. They were designed to help debtor, to protect the debtor against bankruptcy if at all possible and to provide them with alternatives.

*They were most certainly not meant to be construed in such a way as to deny a person bankruptcy who wished to avail of it.*

Instead the banks - aided and abetted by the PIPs who misconstrue the legislation -  will now jump at the opportunity to lock bankrupts into PIAs because
a. they can get paid excess income for longer
and
b. if the debtor gets sick - even if he's 95% of the way through his agreed term - the clock is reset to zero.


Wouldn't you be angry if faced with the possibility of entering a process that might see you reduced to RLE's for 3-4 yrs with the constant fear that if you get sick/hit by a bus/lose your job it will all have been for nothing?


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## Outsider (31 Jan 2017)

Jim Stafford said:


> PIPSs are not brain surgeons, but are financial surgeons. They should be slow to recommend a bankruptcy if another solution is viable.



Given a choice between amputating a cancerous arm (with a guarantee of recovery) or undergoing treatment which if unsuccessful means you lose all your limbs ,which would you choose?

Such is the choice between bankruptcy and PIA.

A surgeon can explain the pros and cons of each but ultimately it should be the patient's choice, don't you think?


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## Dr.Debt (31 Jan 2017)

It seems to me that what you really want is for the legislation to be rewritten to grant absolute rights of bankruptcy on demand.
Personally, I think that's going too far. Creditors rights also need to be taken into account (even if they are banks) You must remember also that bankruptcy was originally a 12 year term, then reduced to three years and since 2016, one year.
So given that bankruptcy is now a much easier process than it was before, I actually agree that some "barriers to entry" are needed. Bankruptcy is a process of last resort to be employed under severe circumstances. We have to be careful that it doesn't becomea convenient process for purging debts willy nilly. And even if a PIA goes wrong. So what. You can always enter the bankruptcy process then. I'm sorry but I'm not that sympathetic. You haven't shared your details with us and until you do I can only assume that you are attempting to unload debts and at the same time seeking to protect income or assets. That's the only plausible explanation..................Post the numbers up and we can all comment


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## Outsider (31 Jan 2017)

Dr.Debt said:


> It seems to me that what you really want is for the legislation to be rewritten to grant absolute rights of bankruptcy on demand.



Nope. I just want the legislation implemented as it was intended.



Dr.Debt said:


> I actually agree that some "barriers to entry" are needed.


And you are agreeing with who exactly?



Dr.Debt said:


> Bankruptcy is a process of last resort to be employed under severe circumstances. We have to be careful that it doesnt become a convenient process for purging debts willy nilly.


The law is the law. If it's abused it will be changed. Until then, with respect, it's not for you to decide how many should get to avail of it.

Do you believe you are correctly grasping the spirit of the law in this instance?


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## Dr.Debt (31 Jan 2017)

Answers to your questions

1, The law should be implemented as it is WRITTEN and reasonably interpreted. That's the only way it can be implemented.
2. I am agreeing with the law as it is written in the context of it being more difficult to enter under recent legislation and
in light of recent relaxations in the bankruptcy process.
3.You have mentioned several times the "spirit of the law" I have to be honest and say that this means absolutely nothing to me.
Not meaning to be rude but I do consider it, nonsense. The legislation covering the PIPs role in providing a clearance letter for bankruptcy is so clear that I cant see how it might be misconstrued and in my view the letter of the law and spirit of the law are at one here.


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## Outsider (31 Jan 2017)

*"The Personal Insolvency Practitioner believes that the debtor is unable to pay his/her debts as they fall due and the debtor’s inability to meet his/her engagements cannot be more appropriately dealt with by means of a Debt Relief Notice Process, Debt Settlement Arrangement or a Personal Insolvency Arrangement."*

Can you define "more appropriate" in this context?
There is obvious ambiguity in the wording and it leaves much to interpretation.

My belief that the law was intended primarily to help the debtor not hinder him can be just as easily accommodated within the wording as your interpretation.

Is it "more appropriate" and "reasonable" to allow a debtor to go bankrupt and start again - with the certainty that bankruptcy brings -  than it is to order a 5 yr PIA which will yield an extra €30,000 to creditors but which will effectively destroy that person's peace of mind for its duration (especially someone who is near retirement let's say) and could - if it fails - utterly destroy him and his family?


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## Outsider (31 Jan 2017)

Deleted


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## Dr.Debt (31 Jan 2017)

In my experience there is a lot more going on in the background of this type of case than first meets the eye.

First of all, the difference for a debtor between pursuing one route rather than the other need not be that great and practically is
usually not that great. For example its easy to imagine that a bankrupt and a PIA client will pay the same amount from their income
each month for the benefit of creditors except that the installment order for the bankrupt will stop one or two years earlier. If the PIA fails due to sickness or redundancy, this shouldn't be much of a problem either. There is an option to go bankrupt at that point if that is necessary and discharge will follow within one year.

In 99% of cases that I have experienced where the debtor is overly enthusiastic about bankruptcy, the real issue and concern from the debtor's standpoint relates to future expected windfalls such as an inheritance, or retirement gratuity or redundancy payment or pension lump sum or whatever it may be. I dont wish to be unkind to the OP by suggesting this  but I do wonder if, like others, this is where his real worry stems from. By going bankrupt sooner rather than later the debtor tries to ring fence future windfalls from creditors. I don't think the legislation should be altered to facilitate this type of scenario or other self-serving interests.

I have nothing further to offer to this discussion


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## Outsider (1 Feb 2017)

Dr.Debt said:


> There is an option to go bankrupt at that point if that is necessary and *discharge will follow within one year*.


I appreciate you've said you will add nothing further but do you know if there would be would be a further 3 year Income Payment order from the point of going bankrupt irrespective of how many years were already spent in the PIA arrangement?
It's the key issue in all this.


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## Dr.Debt (1 Feb 2017)

If your PIA breaks down because you no longer have the income to pay it, neither will you have income to pay a bankruptcy installment order so there's no issue with that at all and definitely not a key issue as you say. Look, Id recommend you talk to a PIP and find out a bit more about it. There really isnt much more to be said.


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