PIA's vs. Bankruptcy
Trying to decide whether to commit to a PIA for six years or find another way of dealing with your creditors is no easy task most of the time. When things are so bad you’re worrying about possible bankruptcy as well, it’s even harder to see the bigger picture and find other possible solutions to your debt problems. Bankruptcy, while a quicker and more final approach to tackling debt problems, has ramifications that can stretch far beyond the bankruptcy award and this makes a PIA better under some circumstances. While both are personal insolvency debt management methods, PIA has many advantages over bankruptcy including:
If you declare bankruptcy, creditors can still continue to call you to try and get a payment, even though they may know about your bankruptcy or worse you tell them and they insist it doesn’t apply to them. They can be very sneaky in their efforts to get money when they are legally no longer entitled to do so. This can go on for months afterwards.
A PIA on the other hand legally protects you from creditors with the help of a Personal Insolvency Practitioner (PIP). It is illegal for creditors to contact you in any way and must deal with your PIP. If they ring, you give them the name and number of your PIP and then put the phone down.
Despite us living in a much more tolerant modern era than we ever have before, bankruptcy still has a certain stigma. Financial information is shared between people every day, becoming a commonplace part of conversations and community. Until that is you announce you’ve just been made bankrupt. That usually stops a conversation in its tracks. Few people talk about bankruptcy, and those that do are uncomfortable doing so. It can be very lonely.
If you have a job with fiscal responsibility, such as an accountant or solicitor, you will almost certainly have clauses in your employment contract that prevent you from declaring bankruptcy or you have to leave your job. This is often the case with other occupations that hold a high level of responsibility, such as a police officer, fire fighter or prison warder. While still considered personal insolvency, a PIA is not always considered as bad as bankruptcy and could help you keep your job.
Debt leaves you with a sense of powerlessness, especially when it overtakes your life and becomes unmanageable. When you add bankruptcy into the mix, you can add helplessness, fear and anger at the way things have turned out. A PIA on the other hand can leave you feelings empowered and much more confident. Your creditors are off your back, you have a budget you can live on and you gain a sense of control over your life once more.
Many debt problems stem from not having the right financial skills at your fingertips to manage your money in the most effective way. Having a PIA means you have to plan your expenditure and live by that plan, you have to live within your means and stick to a budget. In the beginning it will seem alien and maybe even impossible. By the end of the PIA you will be like an old pro, and living within your means will be automatic. With bankruptcy there are no financial skills to learn, just regrets at not having them or the opportunity to learn them for the future. However, PIAs also have their disadvantages over bankruptcy:
To have a PIA means you must own Irish property or assets that have debts of more than €20,000 secured by them. If you own neither, you must seek another debt management solution. So even if your income would allow you to make some reasonable payments to your creditors, it could not be through a PIA.
Bankruptcy on the other hand does not impose such stringent limits.
Bankruptcy is a fairly speedy process compared to a PIA, the latter of which lasts a minimum of six years (can last seven if you have taken a payments holiday or have variation drawn up) and then you still have to build up your credit rating, which can take several years. With bankruptcy, as soon as you are awarded it and discharged from your debts, you can start to rebuild your credit.
You cannot have a PIA and not have a job or be earning self-employed income because your ability to pay your creditors depends on money coming into your bank account. Even if you are being paid benefits you cannot use them to obtain a PIA. Bankruptcy on the other hand doesn’t require any income at all.
Whether you have a PIA or declare bankruptcy you will need to start rebuilding your credit as soon as each is discharged. With bankruptcy this could be a matter of months, with PIA it could be up to seven years before you can get started.
Applying for the PIA is no guarantee you are safe from creditors. Only when you have applied for and received a Protective Certificate, applied for the PIA and been approved, and had the agreement of 65% of your creditors, only then will you be safe from them. If you fail with your PIA application or at the creditors meeting your creditors can move to bankrupt you.
Then there’s keeping up with the payments once you’re on a PIA. If you miss payments your PIA will have deemed to have failed and your creditors will move back into the picture. No matter how many payments you have made to them, if the PIA fails you will be back to square one. Both bankruptcy and PIAs have their advantages and disadvantages, and only a PIP will be able to go through all of your paperwork and assess you current situation to see which is more suitable.
For more information about PIAs and bankruptcy, call one of our experienced advisers now on 0800 193 1024.