Court approves insolvency deal that halves woman’s mortgage

A personal insolvency arrangement (PIA) which involves writing down a €343,785 mortgage debt by more than half has been approved by the High Court for a woman who ran into mortgage arrears due to her husband's gambling problem.

Permanent TSB objected to the arrangement, insisting the proposed write down of some €343,785 to €160,000, the current agreed market value of the woman's home, was "draconian".

Mr Justice Denis McDonald said the woman, a public servant in her 40s with net monthly earnings of some €2,900, is separated from her husband and lives with their teenage daughter in the family home.

She had said in a sworn statement her ex-husband moved to the UK in 2015 and makes no contribution towards mortgage repayments or child maintenance.

The couple jointly bought the house in 2005 with a PTSB loan and the woman experienced financial difficulty for the first time in 2007.

She said her husband developed a gambling addiction and borrowed €7,000 from “loan sharks” to place bets.

His debt became too much to repay, the people from whom he borrowed applied increasing pressure for repayment and she borrowed from her sister to do so.

Her husband’s gambling problem became worse and she fell into arrears with the mortgage repayments and incurred other debts.

PTSB took proceedings against her in the Circuit Court and her Personal Insolvency Practitioner (PIP) proposed a PIA under which the mortgage debt would be reduced to €160,000.

The €173,785 balance would be treated as unsecured debt and PTSB, and a credit union owed some €3,752, would each get a dividend of 8 cent in the euro of that.

At the end of the PIA’s six-year term, the rest of the unsecured debt would be written off.

PTSB voted against the PIA and the credit union voted in favour.

After the Circuit Court rejected PTSB’s objection to the PIA, it appealed to the High Court.

Mr Justice McDonald, in a recently published judgment, held the PIA did not unfairly prejudice PTSB.

He stressed there can be “no question” of any automatic write down of a mortgage debt to the value of the underlying security and the extent of any write down of secured debt was related to affordability.

He concluded, “with some hesitation”, there was just about enough evidence to allow him find the woman was unlikely to be able to afford larger mortgage repayments than the €900 provided for in the PIA and thus to conclude the proposed write down “is not excessive”.

The form of “warehousing” of the secured debt proposed by PTSB was not appropriate because it would mean a large debt for the woman at retirement age, he held.

It was a “fallacy” for PTSB to suggest that everything above the Insolvency Service of Ireland’s reasonable living expenses can be treated as surplus to the woman’s needs, he said.

The woman’s daughter is in her final year of secondary school, hopes to go to college and the woman would be doing very well to keep monthly college costs to €550, he said.

While details about possible salary increases for the woman should have been set out, the failure to do so was “not fatal” because, as a public servant, any increases were likely to be “extremely modest”. The court was not entitled, at this stage, to have regard to her pension entitlements.

He agreed with PTSB too little detail was provided by the woman’s PIP concerning her means and expenditure and stressed there must be “clear evidence” in future cases as to how write-downs have been calculated.

PTSB’s own evidence in the Circuit Court also fell short of making the case it was now making, that the PIP was relying on wholly unsupported and general sworn statements “of a template nature” concerning income and expenditure.

He also said PTSB would do better from the PIA than in a bankruptcy; has protection if the house is sold in the future at a value higher than the agreed market value and can pursue the husband over the mortgage debt.