Both sides appeased by debt deal which is marked by common sense

The court case in Co Clare which saw a man getting €223,000 written off his mortgage debt while allowing him to stay in the family home should give heart to people wallowing in what Minister for Finance Michael Noonan dubbed the "debt swamp" left by the property crash.

The size of the mortgage write-down is considerable, given that the total mortgage was just over €346,000.

Bottom line

But this is not a typical case. The bottom line is that the restructured loan is now affordable for the debtor, while the bank which is owed the mortgage debt will get more than if it pursued alternative courses of action such as forced repossession.

It is telling that the personal insolvency arrangement had the backing of 100 per cent of the secured and unsecured creditors.

The man’s main lenders, both for the secured and unsecured debt, will have figured this is the best they can hope to achieve.

Under the deal KBC Bank will reduce the term of the mortgage by three years and three months and the settlement will now coincide with the debtor’s 70th birthday.

He will pay a revised monthly mortgage payment of €1,200 on the family home for 10 years and three months up to his 70th birthday.

The other key element of the deal will see him paying a lump sum in the form of a dividend to all his unsecured creditors by selling other properties.

By selling these assets he is expected to realise €604,939. The amount owed to unsecured creditors is €1.98 million.

This means they stand to gain a third of the money owed to them.

While they will no doubt feel the pain, it will be a lot less hurtful than the 3 or 4 per cent of the debt they would have got back if alternative measures, including bankruptcy, had been pursued.