The lender's veto has been weakened a little bit

[Brendan Burgess]

[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]

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]

[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]

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]

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.