# The lender's veto has been weakened a little bit



## Brendan Burgess (29 Jun 2012)

_[FONT=&quot]Section 105 [/FONT]_[FONT=&quot]sets out the necessary  proportion of creditors required to  approve   a  Personal  Insolvency   Arrangement.  Subsection  (1) provides  that * each of the following is required:*[/FONT]

[FONT=&quot](_a_)  a majority of creditors representing not less than 65 per cent in  value  of  the  total  of  the  debtor’s debts  due  to  the creditors participating in  the  meeting   and  voting  must have voted  in favour  of the proposal,[/FONT]

[FONT=&quot](_b_)  creditors representing more than 50 per cent of the value of the  secured  debts  due  to  creditors who  are  entitled   to vote  and  have  voted  at the  meeting  as secured  creditors must have voted  in favour  of the proposal,  and[/FONT]

[FONT=&quot](_c_)  creditors representing more than 50 per cent by value of the creditors who are  entitled  to vote and  have  voted  at the meeting  as unsecured creditors must have voted in favour of the proposal.
.

[/FONT]_[FONT=&quot]Section  103 [/FONT]_[FONT=&quot]sets   out  the  voting  rights  of creditors at  a creditors’ meeting.   Subsection (1) provides  that  in general  the voting rights of a  creditor shall be proportionate to the value of the debt  due to the  creditor by  the  debtor. Subsection (3),  however,  provides  that, *  in respect  of secured  debt,  where  the  market value of security   held by a secured  creditor is determined to be less than the value of  the debt due to the creditor, the portion of debt in excess of the  market value of  the   security   shall,  for   the   purposes   of   this   section,   not   be considered as secured*.  Subsection (4)  provides  that  where  a secured creditor waives his or her security,  that creditor shall only be entitled to vote as an unsecured creditor.[/FONT]


----------



## Brendan Burgess (29 Jun 2012)

*Case A 

*

 Mortgage| €200k| actual mortgage, €300k, but property worth only €200k 
Unsecured debt| €30k
The lender controls 100% of the secured debt, so they can veto the PIA. 
A combination of unsecured creditors who are owed €15k can also veto the PIA.  (This doesn't seem right) 

*Case B 

*

Mortgage on home |€200k 
Mortage on RIP|€190k
Unsecured creditors|€30k
Total loans|€420k
Either of the lenders can veto the PIA as they have more than 35% of the total credit. 

The lender to the home


----------



## Brendan Burgess (29 Jun 2012)

[FONT=&quot]*"in respect  of secured  debt,  where  the   market value of security   held by a secured  creditor is determined to  be less than the value of  the debt due to the creditor, the portion of  debt in excess of the  market value of  the   security   shall,  for    the   purposes   of   this   section,   not   be considered as secured*.[/FONT]"

In case A, above the mortgage lender's voting rights are reduced to €200k although they are owed €300k.

But  is the lender treated as an unsecured creditor for €100k as well?

At the briefing by the Dept of Justice today, I was told that the €100k does not count as an unsecured creditor. 

If it did, then the lender could over-ride the veto of the other unsecured creditors.


----------



## ballaboy (30 Jun 2012)

Brendan if it was ammended to 65% in NUMBER and value it would be much fairer and take the power away from one big creditor,same as in Part 4 Bankruptcy Act 1988


----------



## Brendan Burgess (12 Jul 2012)

Hi ballaboy

My gut feeling is that it may well be better for the power to be in the hands of one big creditor. 

Let's say you have agreed the orderly sale of your home with a €200k mortgage shortfall. You also owe MBNA €10k and the local credit union €5k. 

As part of your agreed orderly sale with the lender, it could be on the  basis that a Debt Settlement Agreement be reached where all debts are  written off in full after one year.  The bank might well agree to this. 

The Credit Union and MBNA could block any such  deal being done. 

In reality the CU and MBNA have only 7% of the creditors and should not a veto.


----------

