# What are the clawback provisions if a house is sold after a PIA?



## Brendan Burgess (28 Apr 2013)

I am trying to understand Section 103 of the Act. 

[FONT=&quot](3)  A  Personal  Insolvency   Arrangement which  includes   terms involving—[/FONT]

[FONT=&quot](_a_)  retention [of the family home][/FONT]

[FONT=&quot](_b_)   a  [write down of the mortgage][/FONT]

[FONT=&quot]shall,  unless  the  relevant   secured   creditor agrees  otherwise,   also include terms providing  that any such reduction of the principal  sum is subject  to  the  condition that,  subject  to  _subsections  (4)  _to  _(13)_, where  the  property the  subject  of the  security  is sold  or otherwise disposed  of for an amount  or at a value greater than  the value attri- buted  to the security in accordance with _section 105_, the debtor shall pay to the secured creditor an amount  additional to the reduced prin- cipal sum calculated  in accordance with _subsection (4) _or such greater amount  as  is provided  for  under  the  terms  of the  Personal Insol- vency Arrangement.

[/FONT]
[FONT=&quot](11)  The obligation  to pay an additional amount  arising by virtue of this section  shall cease—[/FONT]

[FONT=&quot](_a_)  on  the  expiry  of the  period  of 20 years  commencing on the date  on which the Personal Insolvency  Arrangement comes into effect, or[/FONT]

[FONT=&quot]
[/FONT]


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## Brendan Burgess (28 Apr 2013)

This is very difficult to understand, but is this correct? 

Under a PIA, the amount outstanding on a mortgage is written down from €300k to €200k, the value of the house. 
Amount of write off €100k

Date PIA comes into effect 1 Jan 2014.  If the house is sold before 31 Dec 2033...



 House sold for |€200k|€250k|€400k
Increase|0|€50k|€200k
Clawback|0|€50k|€100k


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## Brendan Burgess (28 Apr 2013)

In the Sunday Times article, Paul Carroll said


"If they sold their home during a PIA for more than the amount owing on  their mortgage, the bank would be entitled to up to half the difference.  However, if they delayed the sale until the PIA is complete, there  would be no clawback"

Where does this come from?


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## Dr.Debt (30 Apr 2013)

Brendan

I concur with your interpretation of that section of the act.

Any write down of a loan, secured on a debtor's home (as part of a PIA agreement) can be revisited by the Creditor when the property is being disposed of, within a twenty year window and a clawback up to the value of the initial writedown on the loan will be forthcoming at that time.


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## Brendan Burgess (30 Apr 2013)

Thanks Dr D

That is what I thought but it seems that commentators are ignoring it. Maybe it's written in such a way in the Act, that people don't understand it. 

Brendan


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## Jim Stafford (30 Apr 2013)

Brendan

I partially agree with your interpretation.

Section 103 is one of the most tricky, complex provisions of the Act (extending to 13 sub sections and more than 2 pages.) For example, (5) states that any increase in value due to significant improvements shall be disregarded in calculating the additional amount payable. (6) states that (5) shall not apply unless the secured creditor has given his consent to the improvements, but consent shall not be unreasonably withheld. I can envisage a situation where a developer adds €1m of value to a site by getting planning permission, and keeping the €1m!

(11) states that the obligation to pay the additional amount could cease on the date debtor is permitted to fully discharge the debt, and so discharges the debt etc

Jim Stafford


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## Brendan Burgess (30 Apr 2013)

> [FONT=&quot](11)  The obligation  to pay an additional amount  arising by virtue of this section  shall cease—[/FONT][FONT=&quot][/FONT]
> [FONT=&quot] [/FONT]
> [FONT=&quot](_a_)  on  the  expiry  of the  period  of 20 years  commencing on the date  on which the Personal Insolvency  Arrangement comes into effect, or[/FONT][FONT=&quot][/FONT]
> [FONT=&quot] [/FONT]
> ...



I took section (b) to mean that the debtor pays off the full amount secured. So if I have a mortgage of €300k and it's reduced to €200k by a PIA, it is discharged if I pay off the €300k in full. 

Though if that is correct, why would a later date be specified?


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