Despite the challenges of the last number of months we are happy to say that we have continued to assist people resolve their debt worries through the Personal Insolvency legislation as well as in direct negotiations with Vulture Funds to reach settlements of unsustainable debts.

A lot of the time we can deal directly with the relevant bank but in some cases for a variety of reasons the debtors need the assistance of the personal insolvency legislation to resolve their case.

We have set out a summary of a case we resolved through a PIA application this month. For confidentiality purposes we have not included any names of individuals or creditors and we have changed the figures involved to protect all parties to the arrangement.

Successful Personal Insolvency Arrangement (PIA)   

This is a brief summary of a recent PIA which we were delighted to see was approved by the majority of creditors last week.

One part of legislation that was used in this case was a high court appeal case which is referenced as the ‘Deserted Spouse’. In that case the spouse/co-borrower had left the family home and the remaining person was left to shoulder the burden and try to meet the joint debts that they had borrowed.

As can be seen from the below workings in this case her income was not sufficient to meet these repayments and all of these loans fell into arrears. Two of the creditors pursued her and applied judgement mortgages on the family home, which was in significant negative equity following the property crash in the last recession.

In addition, the debtor was now a single parent of a 12-year-old and her financial circumstances after the separation from her husband were very difficult. The debtor sought our help as she found herself unable to meet her financial commitments as they fell due. Also, the stress of the constant phone calls, letters, legal proceedings and emails from her creditors began to impact on her health and the mental health of her child.

The financial position before the PIA was as follows:

As detailed above the assets did not cover the debts, and the income was not sufficient to meet all the monthly repayments and allow for the reasonable living expenses of the household. RLE’s are set by the Insolvency Service of Ireland (ISI) and they would be considered as being 30% to 40% below the cost of a normal standard of living. The RLE’s would only be applicable for the period of the PIA which is 6 years.

The current PPR mortgage was in arrears by €45,000 and the loan had been sold from one of the main banks to a Vulture Fund and they had issued legal proceedings for the repossession of the family home. The fund had instigated the court repossession as they did not feel that there was any solution available that they could offer to resolve the debt other than the borrower leaving their family home by voluntarily surrendering the property.

The financial circumstances were analysed under the current Personal Insolvency Legislation to decide which of the available solutions best fitted the situation.

• PIA Personal Insolvency Arrangement – This is an assessment over a 6-year term to project the dividend that would be available to the unsecured debtors as per the payment plan below and what would be required to restructure the Secured Debts: 
• PPR – The mortgage debt was reduced to the value of the family home of € 200,000 which was affordable. The tracker interest rate is to be retained at 1.15% and the term to be extended by 5 years until the debtor is 68 years of age. The monthly mortgage repayments will decrease from € 1,255 p/m to €836 per month.
• Judgement Secured Debt – As there was no equity in the family home these debts were treated as unsecured debts as part of the arrangement
• Unsecured Debt – All the remaining debts were treated as unsecured in the PIA. Based on a reduction in the PPR loan to € 836 p/m, this allowed for a dividend payment towards the Unsecured Debt of €308 per month, which is for a term of 6 years. Once this dividend has been paid to creditors at the end of year 6 the balance of the unsecured debts that remain will be written off. This will be a 95% reduction in the unsecured debts.
• At the end of Year 6 the debtor is solvent and the only debt remaining would be the new contracted PPR loan which is affordable now and into the future.

The final proposal was taken to a vote at a creditors meeting and it was approved with 100% of the votes. 

This PIA will allow our client to remain in the family home, allow for the reasonable living costs for her and her child, and after the 72 months she will be clear of the old debts and she will be able to continue her life with a sustainable mortgage.

Mortgage to Rent Cases PIA Approved

We are happy to announce that we also assisted two other couples use the Mortgage to Rent (MTR) scheme to resolve their home loan mortgage in a PIA. This will allow them to remain in their family home for the remainder of their lives. I would point out that the MTR structure is only suitable in a strict certain criterion, so it is important to seek the correct advice before you consider this option.

Please contact me on the details below if you have any banking or insolvency questions or concerns.

Regards

Mark Ryan, CPA,

Personal Insolvency Practitioner (PIP),

Director, Quintas

Email: mark.ryan@quintas.ie

Mark Ryan is authorised by the Insolvency Service of Ireland to carry on practice as a personal insolvency practitioner.