Hi sparky1. I discovered only recently (two years down the line) that the IP fees are well over £5k for a "straighforward" TD. I was rather shocked to say the least as the creditors will only receive £3600 between them. I guess this must be the norm. At the end of the day it's all nearly over 🙂

Hello sparky1.

Insolvency practitioners charge out their time (and the time of their staff) in a similar way to lawyers and accountants. Indeed most insolvency practitioners are accountants. The hourly rates charged can seem very high from the outside, but they're in line with other similar professions.

You agree to the fees, which are presented to you prior to signing the trust deed. Your creditors then have the chance to object to the fees when deciding whether to allow a trust deed to become protected or not. If a trust deed has become protected the chances are that the creditors considered the fees to be reasonable.

There is some general concern about the fees for trust deeds though, not least at the Scottish Government who believe that creditors have been getting a raw deal. So there are some changes on the way, though they'll only affect future trust deeds.

It would seem that insolvency practitioners will be paid a percentage of what they collect from their client. This limits what they can charge in fees, and also means that their interests become more aligned with the creditors. Many will see this as a good thing. Even those working within the industry accept that there are a couple of firms that are "milking the system" a little over-enthusiastically.

As a client I'm not so sure it's positive though. Low contribution cases may become uneconomic to run, meaning that more people might have only bankruptcy as an option. While I'm sure most firms will be entirely responsible in the way that they work, there will be a commercial incentive to absolutely maximise contributions from clients as well.

As always with these kinds of changes it's easy to find arguments for and against.

I suppose all good things don't last forever, my IP fees had actually increased above what was agreed on setting up the trust deed and I have still outstanding creditor claims to be dealt with three years on - so like always you wonder if the charges were actually fair.

That's been one of the contentious issues sparky1, namely firms increasing the fees over and above what was originally envisaged.

There can be perfectly reasonable reasons for this to happen, but in the future it would seem that insolvency practitioners are going to have to work harder to gain approval for this.

I think any insolvency tool which earns a firm a bigger return than creditors see is over priced.

Paul

I reckon the vast majority of sequestrations will fall into this category though Paul.