Insolvency experts call a halt to split mortgage debt deals
A BODY that represents personal insolvency experts has called on its members to stop doing certain debt deals until what they say is a snag is resolved.
The Association of Personal Insolvency Practitioners (APIP) is meeting today to discuss whether it should continue to do specific types of debt arrangements after legal opinion emerged questioning if these comply with the law.
The issue involves personal insolvency arrangements (PIAs) that also include split mortgages.
A PIA is the restructuring of mortgage and other debts, up to €3m, with a lower repayment made over a six-year period. Sometimes debts are written off.
Often a split mortgage is agreed as part of the PIA.
A split mortgage involves warehousing part of the mortgage amount, usually for more than six years. No repayments are made on the warehoused part, with some banks charging no interest on the "parked" portion.
But legal opinion provided to insolvency practitioners by barrister Keith Farry BL and senior counsel Mark Sanfey has concluded that under the Personal Insolvency Act a split mortgage cannot be used in conjunction with a PIA.
If a split mortgage is part of a PIA deal, then the amount owed on the mortgage at the end of the six-year deal would have to be written off by the bank, the barristers concluded.
However, a note issued by the Insolvency Service of Ireland (ISI) has questioned this interpretation of the act.
Members of APIP are due to be addressed by the two barristers, and by ISI director Lorcan O'Connor, at their meeting on the issue. Just over 1,000 personal insolvency arrangements have been put in place since 2013.