The High Court on Circuit has allowed an appeal by a County Wexford debtor and approved a personal insolvency arrangement that had been rejected by secured creditor EBS Limited. The arrangement restructures the mortgage and allows the debtor to continue living in her principal private residence with her two young children.
Ms Justice Baker delivered judgment on 21 February 2017. The appeal was from a Circuit Court order made on 4 November 2016, which had refused the debtor’s application under section 115A of the Personal Insolvency Acts and upheld EBS’s objection. The High Court exercised its power under that section to approve the arrangement despite the creditors’ meeting rejecting it on 29 January 2016.
The debtor and her former husband jointly owned the home and were co-borrowers and co-mortgagors on a €300,000 loan taken out in 2007. The judgment says arrears began in 2013, primarily following the debtor’s serious illness and the breakdown of the marriage. The proposed arrangement addressed secured and unsecured debts and split the mortgage into live and warehoused balances. EBS did not object to the split itself, but argued, among other things, that the arrangement unfairly prejudiced it, that its sustainability was not established and that the debtor’s financial conduct and income calculations were problematic.
EBS was concerned that the arrangement could affect its claims against the former husband, who was not participating. The court found that the arrangement’s terms expressly preserved creditors’ rights against people other than the debtor. It concluded that EBS’s position as against the former husband was not lost through his non-participation in the arrangement.
The court compared the proposed arrangement with the likely outcome in bankruptcy. It accepted that the arrangement offered a better return to both secured and unsecured creditors, while also supporting the statutory purpose of enabling the debtor to remain in her home. It rejected the objections based on the debtor’s conduct, the arrangement’s sustainability and the income figures. In particular, it considered the maintenance payments reasonably secure because they were covered by a court order and an attachment of earnings order.
The court’s decision was limited to approving this debtor’s proposed arrangement under section 115A. It did not make the former husband a party to the arrangement. The judgment said EBS retained its claims against him. The court concluded that the arrangement was not unfairly prejudicial to EBS and that its repayment provisions were reasonably likely to be met.