What if secured debt is > €3m?

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censuspro

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Under the PI Act 2012, my understanding is that a DSA (Debt Settlement Arrangement) applies to unsecured debts only with no cap on the liabilities but that a PIA applies to both unsecured and secured but is capped at €3m.

Does anyone know what the procedure is if the total secured liabilities if > €3m or is this outside the remit of the personal insolvency act?
 
The 3M limit on secured debts in a PIA may be increased where all the secured creditors agree to it
 
If you are bankrupt, you can apply for bankruptcy.

The Personal Insolvency Act is not geared for people with huge secured debts. As it is, the €3m limit is way too high.

I would guess that a lot of people with secured debts or around €2m will have their PIA vetoed by the lenders.

Brendan
 
Brendan Burgess said:
If you are bankrupt, you can apply for bankruptcy.

The Personal Insolvency Act is not geared for people with huge secured debts. As it is, the €3m limit is way too high.

I would guess that a lot of people with secured debts or around €2m will have their PIA vetoed by the lenders.

Brendan
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Thanks for clearing that up. Also, am I right in assuming that if a debtor agrees a PIA with a creditor, that it is only the secured element of the loan that is included in the PIA. For example if I have a property worth €250k with a mortgage of €500k then only the €250k is secured from the banks perspective and only €250k is what is included in the PIA i.e. a write down on the debt of €250k?

Curious to know why the €3m threshold for secured debts is considered too high and why banks would veto PIA's around the €2m mark, wouldn't they effectively be pushing people into bankruptcy if that was the case?
 
Hi census

If you enter a PIA, all your debts, secured and unsecured are included.

If you have a mortgage of €500k , and the property is worth €300k, €300k is considered as secured from a voting point of view and €200k is considered unsecured.

I assume that the PIA could be designed that only €100k is written off the total of €500k.

Curious to know why the €3m threshold for secured debts is considered too high and why banks would veto PIA's around the €2m mark, wouldn't they effectively be pushing people into bankruptcy if that was the case?
Click to expand...

The PIA is an extraordinary attack on the property rights of secured lenders. It might be justified in terms of keeping a reasonable family home. But it is not justified in allowing people with secured debt for investment properties to have their debts written off. In all other countries, the lender repossesses the property promptly and both move on.
 
I think something should be cleared up here about PIA voting rights where negative equity applies.

Taking the example of 500K mortgage, and 300K property value as above.

Scenario 1 where the PIA calls for the writing down of the property to 300K
In this case the secured lender has 500K voting power in the "Total" vote
300K voting power in the "Secured" vote and 200K voting power in the unsecured vote

Scenario 2 where the PIA does NOT call for the writing down of the secured loan to 300K
In this case the secured lender has 500K voting power in the "Total" vote, 300K voting power in the secured vote
and NO voting power in the unsecured vote.
 
Brendan Burgess said:
Hi census

The PIA is an extraordinary attack on the property rights of secured lenders. It might be justified in terms of keeping a reasonable family home. But it is not justified in allowing people with secured debt for investment properties to have their debts written off. In all other countries, the lender repossesses the property promptly and both move on.
Click to expand...

Interesting re the property rights of the secured lender particularly in relation to investment properties. Wouldn't the scenario of creditors repossessing the properties and moving also be favorable to debtors providing their not liable for the shortfall after sales proceeds?
 
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