Jim Stafford
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Brendan
I have "cut & pasted" the below from our website:
The amending legislation removing the creditors' veto in a PIA passed all stages in the Oireachtas, and was signed into law by the President on 28th July 2015 . The new legislation will be effective from 20th November 2015.
To say that the amendments are complex is an understatement! The amendments to the Act will only apply to debtors who have a debt which is secured over their family home and in respect of which the debtors, on 1 January 2015, were in arrears with their payments, or the debtors, having been, before 1 January 2015, in arrears with their payments, had entered into an alternative repayment arrangement with the secured creditor concerned. As such, possible removal of the creditors’ veto only applies to a Personal Insolvency Arrangement (“PIA”) and does not apply to Debt Settlement Arrangements.
If a PIA is voted against at the creditors meeting, then the debtor has the right to appeal to the courts to review the creditors’ votes. The appeal would have to be made by the PIP on behalf of the debtor. It is expected that the legal team representing the PIP would require payment up front, and that such a payment would have to be financed by the debtor. No guidelines have yet been given on who will pay the costs of creditors who successfully "win" cases.
Where the debtor has only one creditor, which, by definition, would have to be a creditor secured on the family home, it is possible to appeal a no vote to the courts.
In reality, where a debtor has already entered into an alternative repayment arrangement with his lender, it will be very difficult for a Personal Insolvency Practitioner (“PIP”) to even commence the process of a PIA, as the lender will have probably ensured that the debtor is already solvent within the meaning of the legislation. The definition of solvency is being able to pay debts as they fall due. For example, you might have a debtor whose family home is valued at €200,000 but has a mortgage of €350,000. If the lender is prepared to give a “split” mortgage, and asks the debtor to pay €1,200 a month on €200,000, and “parks” the remaining €150,000, then the debtor might be cash flow solvent, and therefore not eligible for a PIA.
it will now be judges who decide what a sustainable mortgage is, as they will have to abide by the legislation. The key Section of the revised legislation is:
"The court, following a hearing under this section, may make an order confirming the coming into effect of the proposed Personal Insolvency Arrangement only where it is satisfied that—
(a) the terms of the proposed Arrangement have been formulated in compliance with section 104,
(b) having regard to all relevant matters, including the terms on which the proposed Arrangement is formulated, there is a reasonable prospect that confirmation of the proposed Arrangement will—
(i) enable the debtor to resolve his or her indebtedness without recourse to bankruptcy,
(ii) enable the creditors to recover the debts due to them to the extent that the means of the debtor reasonably permit, and
(iii) enable the debtor—
(I) not to dispose of an interest in, or
(II) not to cease to occupy, all or a part of his or her principal private residence"
The judges will, in effect, have to decide on issues of interest rates, length of mortgages, amounts of Principal and Interest payments etc. In theory, a judge could decide to agree a PIP's proposal that reduces the interest rate from, say 5%, to 2%, and extend the term of a loan from, say 20 years, to 25 years. It will be some time before there is a body of case law that can be used to provide guidance.
Where the debtor has more than one creditor, and his PIA is voted down, but some creditors have voted in favour of the PIA, it will be possible to appeal to the courts.
In order for such an appeal to be successful, it must be shown that at least one class of creditors has accepted the PIA proposal, by a majority of over 50% of the value of the debts owed to that class. However, the definition of class for this purpose is not limited to the classes applicable under the legislation (i.e. the existing classes of overall creditors, secured creditors and unsecured creditors) but uses a more flexible “examinership” test. A class may be comprised of any creditors having interests or claims of a similar nature, and a single creditor may be sufficient to constitute a class, though the Court will have regard to the overall number and composition of the creditors and to the proportion of debts due to the class supporting the proposal.
The amendments to the legislation restraining the creditors’ veto will certainly help some people, particularly those people who have mortgages with providers who have thus far refused to engage in the PIA process. However, we believe that in many cases it will be difficult to get loans actually written off on family homes, as we anticipate that many lenders will just simply agree “split” mortgages with debtors and “park” residual debt. Such “split” mortgages do technically restore people to solvency within the meaning of the legislation, even though the debtor may still be ”balance sheet” insolvent. Such people may face a life time of living on Reasonable Living Expenses, with yearly reviews. It remains to be seen if the courts will restrict the amount of debt that may be “parked” on a family home.
As with any new legislation, it will be necessary to see how the courts interpret it to determine if it is workable or not.
Jim Stafford
I have "cut & pasted" the below from our website:
The amending legislation removing the creditors' veto in a PIA passed all stages in the Oireachtas, and was signed into law by the President on 28th July 2015 . The new legislation will be effective from 20th November 2015.
To say that the amendments are complex is an understatement! The amendments to the Act will only apply to debtors who have a debt which is secured over their family home and in respect of which the debtors, on 1 January 2015, were in arrears with their payments, or the debtors, having been, before 1 January 2015, in arrears with their payments, had entered into an alternative repayment arrangement with the secured creditor concerned. As such, possible removal of the creditors’ veto only applies to a Personal Insolvency Arrangement (“PIA”) and does not apply to Debt Settlement Arrangements.
If a PIA is voted against at the creditors meeting, then the debtor has the right to appeal to the courts to review the creditors’ votes. The appeal would have to be made by the PIP on behalf of the debtor. It is expected that the legal team representing the PIP would require payment up front, and that such a payment would have to be financed by the debtor. No guidelines have yet been given on who will pay the costs of creditors who successfully "win" cases.
Where the debtor has only one creditor, which, by definition, would have to be a creditor secured on the family home, it is possible to appeal a no vote to the courts.
In reality, where a debtor has already entered into an alternative repayment arrangement with his lender, it will be very difficult for a Personal Insolvency Practitioner (“PIP”) to even commence the process of a PIA, as the lender will have probably ensured that the debtor is already solvent within the meaning of the legislation. The definition of solvency is being able to pay debts as they fall due. For example, you might have a debtor whose family home is valued at €200,000 but has a mortgage of €350,000. If the lender is prepared to give a “split” mortgage, and asks the debtor to pay €1,200 a month on €200,000, and “parks” the remaining €150,000, then the debtor might be cash flow solvent, and therefore not eligible for a PIA.
it will now be judges who decide what a sustainable mortgage is, as they will have to abide by the legislation. The key Section of the revised legislation is:
"The court, following a hearing under this section, may make an order confirming the coming into effect of the proposed Personal Insolvency Arrangement only where it is satisfied that—
(a) the terms of the proposed Arrangement have been formulated in compliance with section 104,
(b) having regard to all relevant matters, including the terms on which the proposed Arrangement is formulated, there is a reasonable prospect that confirmation of the proposed Arrangement will—
(i) enable the debtor to resolve his or her indebtedness without recourse to bankruptcy,
(ii) enable the creditors to recover the debts due to them to the extent that the means of the debtor reasonably permit, and
(iii) enable the debtor—
(I) not to dispose of an interest in, or
(II) not to cease to occupy, all or a part of his or her principal private residence"
The judges will, in effect, have to decide on issues of interest rates, length of mortgages, amounts of Principal and Interest payments etc. In theory, a judge could decide to agree a PIP's proposal that reduces the interest rate from, say 5%, to 2%, and extend the term of a loan from, say 20 years, to 25 years. It will be some time before there is a body of case law that can be used to provide guidance.
Where the debtor has more than one creditor, and his PIA is voted down, but some creditors have voted in favour of the PIA, it will be possible to appeal to the courts.
In order for such an appeal to be successful, it must be shown that at least one class of creditors has accepted the PIA proposal, by a majority of over 50% of the value of the debts owed to that class. However, the definition of class for this purpose is not limited to the classes applicable under the legislation (i.e. the existing classes of overall creditors, secured creditors and unsecured creditors) but uses a more flexible “examinership” test. A class may be comprised of any creditors having interests or claims of a similar nature, and a single creditor may be sufficient to constitute a class, though the Court will have regard to the overall number and composition of the creditors and to the proportion of debts due to the class supporting the proposal.
The amendments to the legislation restraining the creditors’ veto will certainly help some people, particularly those people who have mortgages with providers who have thus far refused to engage in the PIA process. However, we believe that in many cases it will be difficult to get loans actually written off on family homes, as we anticipate that many lenders will just simply agree “split” mortgages with debtors and “park” residual debt. Such “split” mortgages do technically restore people to solvency within the meaning of the legislation, even though the debtor may still be ”balance sheet” insolvent. Such people may face a life time of living on Reasonable Living Expenses, with yearly reviews. It remains to be seen if the courts will restrict the amount of debt that may be “parked” on a family home.
As with any new legislation, it will be necessary to see how the courts interpret it to determine if it is workable or not.
Jim Stafford
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