Two recent High Court judgments could benefit an estimated 20,000 people with long-term mortgage arrears in Ireland.

The judgements show how workable solutions can be found without having to go to Court, with significance being placed on the proposed solutions being reasonably achievable and not strongly opposed by creditors.

Fennell v Personal Insolvency Acts 2012-2015

In what has been regarded as an important test case on the issue of proposed extensions to mortgage terms, the High Court refused to approve a Personal Insolvency Arrangement (“PIA”) under which a pensioner, Ms. Fennell, would have been required to make repayments on her mortgage until she was aged 98.

Ms. Fennell, who owes Ulster Bank €72,500, sought to restructure the length of her mortgage payments to 348 months under the PIA. Ulster Bank, the sole creditor, opposed the PIA.
Mr. Justice Sanfey said 69-year-old Ms. Fennell would not be reasonably likely to be able to comply with the terms of the proposed PIA. The Judge, noting the bank’s opposition, said the Court was satisfied that such an arrangement was not permissible where the term of the restructured loan would likely have exceeded the debtor’s lifespan.

He said his judgment may provide clarity in relation to such arrangements which offer for an extension of a mortgage term to a point where the debtor may not be alive and whether these can be permitted by the Courts.

The Judge said the Personal Insolvency legislation would have to be amended for such an arrangement to be approved by the Courts. He added that the aim of restructuring a mortgage term beyond a debtor’s lifetime is to ensure affordability of the repayments and to secure the continued residence of the debtor in their family home.

The case will return before the Court in due course for final orders.

The approved judgment, which was delivered on 29 April 2021, is available here.

Kirwan v Personal Insolvency Act 2012-2015

In a subsequent High Court decision, Mr Justice Sanfey approved a PIA that will see 54-year-old Ms. Kirwan continue to make mortgage repayments on her family home until she is 90.

Ms. Kirwan has overall debts of €108,000, €83,000 of which is owed to Start Mortgages in respect of her home, with the remainder owed to AIB for loans advanced to her former business and to the Revenue.

Under the terms of the PIA, Ms. Kirwan’s mortgage will be restructured with monthly repayments of €215 to be made over the next 420 months to cover the interest on the mortgage. The loan is not being reduced and will be payable on the expiry of the 420-month term or on her death, whichever occurs first. Should Ms. Kirwan die before reaching the age of 90, the balance of what is owed to Start Mortgages will be paid from the proceeds of the sale of her estate.

The PIA was supported by Start Mortgages, and none of her unsecured creditors voted against the proposal.

The Judge said that it was appropriate to approve the PIA and not override the wishes of the debtor, her professional advisors, and her creditors. He described the solution as “an exemplary illustration” of how the insolvency system should work, while recognising the unusual long-term nature of the proposal.

The Judge, importantly, distinguished this case from the above case involving Ms. Fennell, in which the Court refused to approve the proposed PIA, noting that the proposed PIA involved Ms. Fennell paying a mortgage until she was 98 years of age and which the Judge said was “strenuously opposed” by her largest creditor, Ulster Bank.

The approved judgment, which was delivered on 13 May 2021, is available here.