Farmer holds on to family farm in debt writedown case

A farmer has secured a court deal restructuring his farming and property debts through a personal insolvency solution while securing a write-off of €708,000 on his home mortgage and holding onto his farm.

The High Court approved a personal insolvency arrangement (PIA) for Charles Kavanagh, a 58-year-old farmer from Co Wexford, enabling him to hold onto 180 acres of farmland which have been in his family for generations.

Mr Justice Mark Sanfey signed off on the arrangement in the first High Court-approved PIA involving a farmer where the debtor has held onto their farm and had other debts written off.

The PIA wipes out the portion of the Start Mortgages home loan covering the negative equity – the part of the loan in excess of the value of the property – on the family home in Enniscorthy and leaves him with farmland needed for his day-to-day income.

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Mr Kavanagh had attempted to reach a debt settlement with Promontoria, the investment fund that acquired one of his loans from Ulster Bank, a debt of €284,859, secured on his farmland.

Settlement

He enlisted the support of the Irish Farmers’ Association (IFA) in an effort to negotiate a settlement but was unsuccessful, and Promontoria appointed a receiver over 31 acres in 2017.

The approval of the PIA means that the receiver must now stand aside.

Promontoria objected to the proposed PIA and Mr Kavanagh appealed to the High Court under section 115a of the Personal Insolvency Act that allows him to challenge a creditor’s veto.

The court was told that creditors would receive 61 per cent of what they are owed under the PIA but just 43 per cent if Mr Kavanagh were adjudicated a bankrupt.

Mr Kavanagh, who was represented in court by Keith Farry BL and solicitor James Staines, has total debts of almost €3.2 million.

Under the PIA, Mr Kavanagh, a tillage farmer who was also involved part-time in the construction of development sites and rented a quarry, will be given 36 months to complete the build-out of properties in Co Wexford worth €385,000 to be sold to repay Promontoria in full.

Properties

Mr Kavanagh will also sell unencumbered properties in Enniscorthy that will go towards repaying his creditors and will put his pension towards his debts, netting creditors €40,000.

The case was described by one source as “more akin to an examinership” – a court-approved restructuring of corporate debt – because of its complexity and the various types of debt involved.

Gary Digney, Mr Kavanagh's personal insolvency practitioner with accountants PKF-FPM, said that he worked with the Irish Farmers' Association on finding a solution for the farmer and hoped that this could be a solution that many indebted IFA members could avail of.

“I am delighted that personal insolvency arrangements for farmers have now been proven to work in the High Court,” he said.