Personal Insolvency Arrangement (PIA) incorporating Mortgage to Rent (MTR)

Case Study 1

Greg and Sandra are married with grown-up children. Greg is 56 and Sandra is 57. Greg was a self-employed small builder in the lead-up to the financial crash. Greg had borrowed heavily to purchase land to build a number of houses. While he managed to build the houses, he was unable to sell them at a price that would clear the associated debts. Greg has tried to secure work in the construction sector in the years since his building business ceased trading, but he has been unable to find work.

Sandra works with the HSE as a Home Help assistant. She has worked with the HSE for 21 years. Her income is modest and does not provide a capacity to fund a restructured mortgage loan. Greg and Sandra met with a personal insolvency practitioner (“PIP”), who assessed their situation and advised them that a PIA was the best solution for them. The couple were able to avail of vouchers under the Abhaile Scheme.

Summary

Solution

As part of the MTR process, on the coming into effect of this PIA, the debtors will voluntarily surrender their interest in the family home to the secured creditor, with the PIP facilitating this process. The creditor will sell the property the subject of their security to an Approved Housing Body (“AHB”) for an amount to be agreed between the creditor and the AHB. Following the purchase of the debtors’ family home by the AHB, the debtors will be offered a social tenancy agreement providing for the continued occupation of their family home with a social housing rent, subject to the AHB’s standard tenancy agreement terms and conditions. The PIP has allowed ample timing for the MTR process to conclude (PIA duration is 72 months). By delivering the MTR solution through a PIA, the PIP has ensured that all other debt belonging to the couple (including all remaining mortgage debt which may be outstanding after the MTR transaction completes) is dealt with.

During the PIA, the couple will be required to make a modest contribution of €291 per month – the equivalent of the social housing contribution they will be required to make once the MTR is complete. This will be used to contribute towards the PIP’s fees as the mortgage lender has agreed to a capital and interest moratorium on the mortgage to facilitate this.

Personal Insolvency Arrangement (PIA) incorporating Mortgage to Rent (MTR)

Case Study 2

Gavin is divorced and resides in his principal private residence (“PPR”). Due to the failure of Gavin's business and subsequent failure of his marriage, Gavin was unable to continue to repay his debts as and when they fell due. Gavin is in receipt of disability benefit from the Department of Social Protection.

Gavin contacted a PIP, who assessed his situation and advised him that a PIA was the best solution for him. He was able to avail of a voucher under the Abhaile Scheme.

Summary

Solution

The property will be transferred to an approved housing body (“AHB”), under the MTR scheme within 12 months of the court approval date of the PIA. On successful completion of the transfer, the debtor will pay rent directly to the housing association and will continue to reside in the house as a tenant of the housing association but will no longer own the property.

The debtors contributed a lump sum of €1,600 which covers the PIP’s fee, with the balance to be made available to unsecured creditors.

The PIA was due to be completed in 12 months but was extended by a further 12 months to allow for delays in the MTR process.

* Please note that the PIP fee in this instance does not represent an economic or sustainable level, but reflects the generosity and goodwill of the PIP involved.