Insolvent Professionals in Ireland - Article 1
This is the first in a series of articles which will look at the potential effects on the career of a professional who is working in Ireland and is threatened with becoming personally insolvent. To start with we will take an overview of the effects of insolvency generally on the professional. Financial problems beset people from all walks of life. Just because somebody has a desirable or esteemed profession does not bestow immunity from becoming heavily indebted. Professional people used to be the envy of society, generally because of their perceived high incomes and apparently comfortable lifestyles. However sudden changes in earning capacity or in other family circumstances can cause hardship for such professional people if they falter in meeting their financial obligations.
There are many careers which we consider to be professional in nature. When we think of professional employment, we tend to think of just a few professions such as doctor, dentist, veterinary surgeon, accountant, auditor, solicitor, barrister, engineer, pharmacist, teacher or garda. However, for the purposes of these articles we must include the many other occupations which are characterized by the nature of the responsibilities involved, the high level of trust required and the nature and level of contact with the public.
Many of the professions under consideration have their own recognised professional body or RPB which admit, regulate, register and license their members to practice their particular profession. In many cases the professional would be unable to practice their profession without being a member of their RPB.
By setting standards of performance, competence and conduct the RPB maintains the integrity of the profession as a whole. It is important therefore that the professional is able to become and remain in good standing a member of their RPB. One of the considerations that many RPBs take into account is the financial standing of their members. They naturally would like their members to be solvent. Many RPBs want to know if any of their members is threatened with insolvency or has recently become insolvent or has entered into a financial arrangement with their creditors whether formal or informal.
There is significant variation in the way different RPBs deal with the insolvency of their members whether threatened or actual. Some RPBs may for example immediately expel, exclude or eject a member who becomes bankrupt. In such a case when membership ceases the member may be unable to practice their profession and may thereby be unable to earn a living, thus causing their already acute financial circumstances to deteriorate even further. Other RPBs take a more benign approach and provided that their insolvent member notifies them in a timely way and discloses their financial difficulties honestly and fully, they may not be faced with immediate cessation of membership but rather may be subject to other disciplinary action and may perhaps be faced with some less severe sanctions.
If threatened with their own personal insolvency, the professional should establish if possible what their own RPB’s approach is likely to be. Can they approach their RPB with a series of ‘what/if’ queries, so as to determine the sanctions regime, without divulging upfront that they are considering a formal personal insolvency solution?
The main formal personal insolvency options in Ireland are Bankruptcy, a Debt Settlement Arrangement (DSA) or a Personal Insolvency Arrangement (PIA). Perhaps they should first seek legal advice from their solicitor, and/or financial advice from a Personal Insolvency Practitioner (PIP) or from a qualified independent debt adviser or from the Money Advice and Budgeting Service (MABS) who might be able to determine quite quickly what, if any, sanctions their RPB might apply in the event of their pursuing one of the above options. It is possible that taking such advice might unearth an alternative solution to their financial difficulties without having to go down the formal personal insolvency route and so avoid having to disclose their predicament to their RPB.
In general Bankruptcy attracts more serious sanctions than either a DSA or PIA does, but of course RPBs generally may not have fully developed and finalized their approach to members who pursue either of the last two relatively new solutions. Some sanctions may be mandatory and some may be at the discretion of the RPB. There is a surprisingly wide variation in the severity of the sanctions that may be applied, depending on the RPB of which the professional is a member. The RPB will generally consider all the circumstances of the insolvency, particularly if the application of sanctions is discretionary.
If the member is ejected, excluded or expelled from the RPB, re-admission may be possible and the RPB may also grant a right of appeal. The RPB may also have a benevolent fund available to assist its insolvent members by providing advice or financial assistance or both. Again, a solicitor, PIP or independent financial adviser may be able to advise the professional on these matters.
In future articles, we will look at some specific mainstream professions and the current approach, so far as it is publicized, of the relevant RPB to the continued membership or otherwise of a professional who adopts one of the formal insolvency solutions now available in Ireland.
Article written by: Paddy Byrne