The High Court has refused to confirm a proposed personal insolvency arrangement for a Cork debtor, finding the application premature and fundamentally unfair to the mortgage lender, Pepper Finance Corporation (Ireland) DAC. The court’s judgment was delivered on 5 February 2021, following an appeal from the Circuit Court’s refusal of the application.
The proposal would have reduced the mortgage secured on the debtor’s home to its agreed market value of €185,000, written off €115,383 of the debt, and restructured the remaining loan. The debtor was to pay €690 a month for the first year and €866 a month for the second year of the 24-month arrangement. Pepper objected. Its mortgage was up to date, with interest-only payments of €275 a month, but the full capital balance was due in 2025.
The judge found that a judgment mortgage debt held by Everyday Finance DAC could qualify as a “relevant debt” for the statutory process, although it was treated as unsecured in the proposed arrangement. He also found that the debtor was eligible to propose an arrangement despite an incorrect declaration about participation in a mortgage arrears process. The judge said the declaration and a later statement from the personal insolvency practitioner were inappropriate, but concluded that the statutory mortgage-arrears criteria were not a necessary prerequisite in the unusual circumstances of this case.
The judge was satisfied, despite concerns about tight household finances and future expenses, that the debtor was reasonably likely to comply with the arrangement. He noted, however, that the debtor’s father was a co-borrower and that the proposal did not address the father’s means or liabilities. The lender retained its right to pursue the co-borrower under the loan agreement.
The decisive issue was whether the arrangement was appropriate. The judge noted there was no evidence that other creditors were pressing the debtor to pay his historic debts, and that the mortgage itself had not caused or contributed to his insolvency. Approving the proposal would impose a substantial write-off on Pepper despite the loan performing according to its terms, while no other creditor was affected to the same degree.
The court did not confirm the arrangement. It said the application was, at best, premature, while recognising the debtor’s genuine concern about the 2025 capital payment and Pepper’s stated willingness to discuss a restructure. The judge directed that the matter be listed after seven days to hear the parties on the terms of the order; the judgment did not itself specify the final order’s terms.