Phil MeekinView Profile
An area infamous for causing friction between insolvency practitioners (IPs) and creditors is the level of fees in insolvency cases. Since the fees may be perceived as excessive, it can be easy to mistrust insolvency practitioners and mistake them for money grabbers, trigger-happy for closing businesses.
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.
Helping creditors understand
Creditors can request (and should be provided with) a breakdown of time charged, with a supporting narrative. This area should not be one of conflict, but an opportunity for IPs to engage with creditors, explaining and justifying the work undertaken and its quality.
IP’s are sometimes guilty of assuming creditors understand their role, but this is not always the case. If, as a professional, we are not willing to explain our role, then mistrust of the profession will continue. Creditors would be best to pick up the phone or arrange an appointment to seek clarification. Unfortunately, a chain of e-mails can soon get out of control, sometimes creating more problems.
It is easy to look at charge-out rates and feel outraged, especially if you’re a creditor standing to lose money. However, the devil is in the detail. It is essential to feel comfortable that staff with the correct experience are dealing with different tasks ensuring value for money. The average charge out rate should give a realistic assessment; providing comfort that the right number of staff are on the case.
Insolvency practitioners sometimes get a bad reputation due to the level of fees charged. However, they work off best practice guidance set out by their regulatory bodies, and creditors can request a breakdown of charges to help them understand where the money is being spent.
IPs are there to help you, so if you find yourself or your business struggling with debts, or you’re a creditor of someone who is, we’d encourage you to pick up the telephone and engage with us. Let’s remove the mystique surrounding insolvency fees.