Insolvency ruling that couple can stay in home gives hope to hundreds of families
A couple and their two young children can remain in the family home, after a judge dismissed a fund's objection to their proposed personal insolvency arrangements (PIAs).
In a significant judgment, Ms Justice Marie Baker rejected the Shoreline Residential DAC investment fund's claims of unfair prejudice.
The High Court effectively found that writing off negative equity in full, and fixing the interest rate to the end of the term of the mortgage, was not an unfair prejudice. It is expected that hundreds of cases currently adjourned before the Circuit Courts will be affected by this judgment.
Shoreline Residential DAC, an investment fund, is owed about €323,000 having acquired loans from Irish Bank Resolution Corporation.
The debt is secured on the couple's home, valued about €190,000, and their PIAs provide the €323,000 debt be written down to €190,000.
On foot of objections from Shoreline, the Circuit Court refused last February to approve interlocking PIAs for the couple as proposed by their Personal Insolvency Practitioner.
In her judgment yesterday allowing the appeal by the couple, Ms Justice Marie Baker said two primary matters arose for consideration.
The first was the PIAs' proposal to extend the remaining mortgage term of 18 years and two months to 27 years, when the husband will be 79 and likely to have retired, and his wife will be 68.
The second matter was the proposal to fix interest for the entire term at a rate of 3.65pc. During the six-year period of the PIA, interest-only payments would be made on the mortgage. After this, the interest rate would remain at 3.65pc over the remaining term of the mortgage. Shoreline argued the proposed PIAs were unsustainable and would not return the debtors to solvency. It also claimed the PIAs unfairly prejudiced the fund's interests.
Ms Justice Baker said the couple live in a "modest family home" and have a joint monthly income of some €3,112 with set costs of €1,835.
Their PIAs also provided for monthly mortgage repayments of €1,080, plus €106 mortgage protection insurance. The monthly outgoings of €3,022 left them with a monthly surplus of some €89.
The PIP asserts the mortgage payment of €1,080 is sustainable on the couple's current income. She was satisfied the total available income was correctly stated at €3,112 and the means by which payments are to be met on restructuring of the mortgage were adequately reflected in the income and expenses schedule.
While the proposed PIAs would "stretch" the couple, especially in their later years, the wife has a secure income, is "significantly younger" than her husband and the extended mortgage term will not extend far into her retirement, she said.
She was satisfied the PIAs, and mortgage repayment following successful completion of the PIAs, could preserve the family home. In no sense could it be argued the couple would get a "bonanza" but they could be expected to return to solvency.
Shoreline, she also ruled, had not provided sufficient evidence to show fixing interest at 3.65pc over the extended mortgage term would be unfairly prejudicial to it.