Dear Reader,
Welcome to our Personal Insolvency update.
The main elements of concern for those in debt in 2019 will be engaging with the Vulture Fund that has purchased their loan and the attitude of the courts as regards granting the repossession of their family home.
In a case where someone is being pursued by a Vulture fund or their bank the only form of protection available to them is availing of the personal insolvency legislation and making an application for a Protective Certificate (PC). A PC immediately stops all legal and enforcement proceedings against an individual on the date the PC is issued for a period of 70 days. This allows a Personal Insolvency Practitioner (PIP) step into the person’s shoes during the PC period to put a restructure in place to resolve the person’s debt and in most cases, they retain their family home.
We have included some recent insolvency case summaries that were approved by creditors as examples of the work we do every day to help people to resolve their debts and stay in their homes.
I have also included an update on the most recent statistics which are issued quarterly by the ISI. The number of arrangements approved to date is still quite low in my opinion, but it is increasing every month. Despite the legislation being enacted in 2012 I still find the lack of awareness of how the personal involvency system works staggering.
The number of licenced PIP’s has continued to decline from the peak number of 146 in June 2015 to 110 in September 2018. This number will continue to fall as this has become a niche area with less than 30 of the PIPs included on the ISI register actively operating and up-to-date with the legislation. This means it is even more important to get the right advice from the right PIP advisor.
As the statistics included below outline ‘90% of those who seek the protection of the court through the personal insolvency legislation retain their family home’ whilst also resolving their other debts. This is a statement that I can confirm from dealing with hundreds of cases over the last number of years.
The Abhaile scheme which allows those with debt problems avail of free financial and legal advice will continue to be funded by the government for 2019.
We have also included a summary of a landmark court ruling that will affect homeowners facing repossession proceedings.
These are links that you should review if you are worried about your debts. Alternatively, please contact me on the phone number or email address below.
We hope you will find the update useful and if you have any queries don't hesitate to contact the Personal Insolvency Department by email at info@quintas.ie or call 021 4641400.
The following is a listing of the topics we are covering in this update:
- Overview of the key discussion points for 2018/2019
- Analysis of 128 completed PIA’s – with a PPR Restructure
- Case Summary 1 – Accelerated DSA (6 months)
- Case Summary 2 - Variation of a Standard 6-year PIA term
- Case Summary 3 – Accelerated PIA (12 months)
- Main Consequences of Bankruptcy and the Family Home
- Landmark Court Ruling which will affect homeowners facing repossession
- Update on the ISI Statistics Report to Q3 2018 (30th September 2018)
Overview of the key discussion points for 2018/2019
A Personal Insolvency Arrangement (PIA) deals with the restructure and write off of secured and unsecured debt. The main element of the PIA is the restructure and the putting in place of a sustainable debt in connection with the family home.
A summary of the 128 PPR restructures is as follows:
- This was a review of 128 cases to the end of June 2018 of cases where vouchers under the Abhaile scheme were redeemed in Q3 2017
- Average mortgage debt €269,000
- 27% of borrowers secured a reduction in the principal sum of their mortgage - average principal reduction was €120,000
- All 128 of these debtors had sought the advice of a PIP through the Abhaile Scheme
- All 128 cases were either before the repossession courts, had legal proceedings pending against them or they had received a final demand from their bank
- The graph below outlines the list of options that are available to a PIP as part of a PIA to restructure a family home loan
Case Summary 1 – Accelerated DSA (6 months)
- Type of Arrangement: Accelerated DSA (6 months)
- Debtor: Husband sole applicant (Company Director)
- Creditors: PPR and unsecured debts re Property Investments and Business Failure
- Total Debts: € 6.3m
- Total Net dividends: Proposed at € 75,930 (based on 5 Year DSA Term) OR € 30,000 for the Accelerated DSA
- The majority of creditors accepted the € 30,000 lump sum as full and final settlement of the total debt due. The debtors made this payment within 6 months and he has now exited the insolvency process.
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Creditors had no issue with the PPR loan notwithstanding that it was in substantial positive equity. Judgment proceedings were scheduled at the time. The main issue related to unsecured debt due a business failure, property investment and speculation. A family member provided the lump sum.
Case Summary 2 – PIA - Variation of a Standard 6-year PIA term
- The PPR loan was reduced to a sustainable level. The BTL and commercial properties were surrendered. The judgment mortgages were included as unsecured debts. Revenue opted in to the arrangement. Due to ill health of one of the debtors a variation was proposed and accepted by creditors
- A variation of the court approved 6-year PIA was required due to a material change in the debtor’s health and financial circumstances. The 6-year standard PIA was converted into an Accelerated 12-month PIA with a lump sum payable of € 15,000
Case Summary 3 – Accelerated PIA (12 months)
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This was a complex case. The PPR loan was reduced by their retirement lump sum and from a personal loan to the debtor from a family member. The balance remaining on the PPR was treated as an unsecured debt. The BTL properties were surrendered. The debtors’ both retired and retained their PPR. They exited the arrangement after 12 months.
Main Consequences of Bankruptcy and the Family Home
The main consequences of Bankruptcy are:
- All unsecured debt is written off;
- Property and possessions transfer to the Official Assignee (except for essential assets up to a value of €6,000);
- Any surplus income (income less reasonable living expenses) must be contributed towards debts for up to 3 years;
- If seeking credit above €650, a person must disclose that they are bankrupt;
- Discharge from bankruptcy is normally after 1 year. However, this term could be shorter if settlement with creditors is reached but it could also be extended if a person does not fully cooperate with the process.
Income Payment Order
During the bankruptcy process, the ownership of the bankrupt’s property and possessions transfers to the Official Assignee in Bankruptcy to be sold by him for the benefit of creditors. Any debtor declared bankrupt is entitled to have a reasonable standard of living as set out under the ISI model. This includes an allowance set aside for food, clothing, education, healthcare etc and a modest allowance for savings and contingencies. If the debtor has no surplus income left over after what is defined as a reasonable standard of living, the Official Assignee will confirm that the funds are not available to generate a divided to creditors. Generally, where there is a surplus in income after expenditure, a bankrupt must contribute that remaining surplus income to the Official Assignee for a period of up to 3 years and they will then distribute it to creditors. This is known as an ‘Income Payment Order’.
Family Home
The bankrupt’s interest/share in the family home is transferred to the Official Assignee. While there is a possibility of losing your family home, you should not assume this is an automatic procedure in bankruptcy. Where it is feasible, the bankrupt’s spouse will be given the option to buy the interest of the bankrupts share of their home from the Official Assignee. Once this has been agreed the legal interest will then be transferred back to the spouse. In other cases, if it was the case that the family home was in negative equity, which means its market value was less than any outstanding mortgage on it, there may be no immediate reason for the Official Assignee to sell.
Pension
Most pension arrangements will not be transferred to the Official Assignee, unless they are accessible during the period of the bankruptcy term.
Exit from bankruptcy
After 1 year a debtor is discharged from bankruptcy and all their debts will be written off. They are now solvent, and they will start with a fresh financial clean slate and they will be able to regain some financial independence.
For years people believed that making an application for bankruptcy was a last resort before total financial ruin, and as such, was a humiliating process, silently battling the burden of overwhelming debt, one to be kept secret from their nearest and dearest. But thankfully all that is changing. Bankruptcy is no longer something to be ashamed of, but is a viable, workable option which can secure your financial future, give you peace of mind and put you on the path to solvency.
Homeowners face further threat of repossession following a Court of Appeal’s landmark ruling
The Court of Appeal’s ruling should see a faster judicial process on the repossession of homes where over 1,700 home loans may be affected by this ruling. The ruling involved the Court of Appeal upholding the registration of a vulture fund as owner of a charge on a borrower’s home and the borrower not being entitled to challenge the registration of this charge on his home.
Background
The background to the decision is Bank of Scotland (Ireland) Limited ("BOSI") loaned monies to Mr. Rolf Kane and secured the loan by way of a mortgage over his family home and registered the charge in the Land Registry in 2006. Subsequently, all assets and liabilities of BOSI including the mortgage and charge over Mr. Kane's property transferred to Bank of Scotland plc ("BOS") pursuant to a cross-border merger in 2010 and BOSI was then dissolved. Importantly, no steps were subsequently taken to register BOS as the legal owner of the mortgage and charge in the Land Registry.
BOS sold a loan portfolio to a US vulture fund called Tanager DAC ("Tanager") in 2014. Among those loans was Mr. Kane’s mortgage and Tanager registered its ownership of the charge in the Land Registry. Mr. Kane apparently fell into arrears on his mortgage repayments and Tanager issued proceedings for possession of the property in the Circuit Court.
The core argument was whether BOS, as unregistered owner of a charge registered by BOSI on his home, was entitled to transfer that charge to Tanager without itself becoming formally registered. Another key issue was whether the Property Registration Authority (“PRA”) was entitled to register the vulture fund as owner of the charge. Mr. Kane argued that Tanager’s registration as owner of the charge was a “mistake” by the PRA as Tanager never acquired title to the mortgage and was thus not entitled to enforce the mortgage against him.
The Circuit Court found in favour of Mr. Kane and refused to grant Tanager its repossession order. This decision was appealed by Tanager to the High Court. The High Court then referred the case to the Court of Appeal on the basis that there were significant legal issues “of considerable public importance” and that such a ruling could potentially affect hundreds of other loans and repossession cases. Tanager made an appeal and argued that the register of titles was “conclusive” evidence of its title and Mr. Kane could not challenge it.
Court of Appeal’s Ruling
The Court of Appeal held:
- The Land Registry/Register of Titles is conclusive evidence of title in possession cases and this cannot be challenged. The party seeking possession must prove that it is the registered owner of the mortgage and it is that registration which triggers that party's statutory entitlement to seek possession. Therefore, the Court cannot look behind the register in possession proceedings.
- The jurisdiction to rectify the register on the grounds of actual mistake is limited to proceedings between the registered owner of the mortgage, in this case Tanager, and the party who asserts that they are the correct owner of the mortgage (BOS). Therefore, Mr. Kane did not have locus standi (a right to bring an action), to make an application to rectify the register.
- BOS was entitled to transfer its ownership of the mortgage to Tanager notwithstanding that it was not registered as the owner in the Land Registry.
Implications of this ruling
The implications of this judgment from the vulture funds point of view as an acquirer of loan portfolios, is that a court cannot be asked to look behind the register which provides conclusive evidence of a party's title to a charge. This will provide comfort to acquirers of loan portfolios in repossession proceedings so long as they have taken steps to have their ownership of charges registered in the Land Registry.
However, the implications of this judgment on borrowers such as Mr. Kane is that properties that could not be potentially repossessed because a cloud was hanging over the title deeds can now be repossessed.
We are acting on behalf of multiple clients whose mortgages have been sold to vulture funds and we are assisting them to restructure their mortgages through a PIA as part of the personal insolvency process or informally through the debt resolution process. If you need assistance or know of anyone who may need assistance regarding their mortgage debt being sold to a vulture fund or their homes being at threat of repossession or being in the repossession process, please contact me.
If you are currently in arrears on your home mortgage, I will be able to apply for a MABS voucher under the Abhaile scheme which includes meeting with you, assessing your financial position and providing you with a letter of advice in writing at no cost to you.
ISI Statistics Report to 30th September 2018
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The number of debtors securing Personal Insolvency Arrangements (the solution that returns debtors to solvency while keeping them in their home in over 95% of cases), are up 60% compared to the 3 months of Q3 2017.
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The high level of new applications has been maintained largely due to Abhaile, the Government's free mortgage arrears support scheme, which includes free Personal Insolvency Practitioner consultations for insolvent debtors.
- The number of Protective Certificates - a lead indicator of debtors who will, over time, enter into an Arrangement - also continues to rise.
- The number of PIA approvals has declined which is largely reflective of the 500+ appeal cases currently subject to a Section 115a Court review.
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Bankruptcy rates are marginally behind those of last year.
Review of the ISI Statistics Report to Q3 2018 (30th September 2018)
For the Full Report please – click here
- 14,176 DRN, DSA and PIA Applications since launch
- 7,450 Protective Certificates since launch
- 4,977 Arrangements approved since launch
I hope you found this update informative and if you have any queries or concerns please contact me.
Yours sincerely:
Mark Ryan, CPA,
Personal Insolvency Practitioner (PIP),
Director, Quintas
Email mark.ryan@quintas.ie
Tel: 021 4641400
Mark Ryan is authorised by the Insolvency Service of Ireland to carry on practice as a personal insolvency practitioner.
Mark Ryan has been operating as a PIP since the inception of the Personal Insolvency legislation in 2012. With years of experience in negotiating debt restructures, personal insolvency arrangements and dealing with bankruptcy applications our team can advise you on the best course of action.
