After working in the insolvency profession for 23 years, one of the areas causing most friction between insolvency practitioners (IP’s) and creditors is the level of fees in insolvency cases.
In recent years, the profession has made great strides in improving transparency. The Statement of Insolvency Practice 9 (“SIP9”) gives best practice guidance to insolvency practitioners to ensure creditors can make an informed decision on whether the fees charged reflect the complexity of the work undertaken and the results achieved by the appointed practitioners.
Creditors can request (and should be provided with) a break down of time charged, with supporting narrative. This should not be an area of conflict but an opportunity for IPs to engage with creditors, explaining and justifying work undertaken and the quality of it. IP’s are sometimes guilty of assuming creditors understand their role; but experience tells me this is not the case. If, as a profession, we are not willing to explain our role then mistrust of the profession will continue. I would always encourage creditors to pick up the phone or arrange an appointment to seek clarification. But experience tells me a chain of e-mails can soon get out of control, usually creating more problems.
It is easy to look at charge-out rates and feel outrage, especially if you’re a creditor standing to lose money. However the devil is in the detail. It is essential to feel comfortable staff of the correct experience are dealing with different tasks ensuring value for money. The average chargeout rate should give a realistic assessment providing comfort that the correct level of staff are on the case. Clearly it would be inappropriate for an experienced and qualified IP to be undertaking routine work; conversely it could be costly for creditors if inexperienced staff make strategic decisions.
IPs “want to be loved” so I would encourage creditors to pick up the telephone and engage with us. Let’s remove the mystic surrounding insolvency fees.