The High Court has approved Personal Insolvency Agreements (PIAs) which will allow a couple to write off a significant amount of their debt to financial institutions and keep their family home.
In a written judgment, Judge Mark Sanfey said he was prepared to approve the PIAs for Eugene and Mary Power despite the fact that the arrangements could require the powers to live on less than the “reasonable living expenses” recommended to some times.
The Powers, a married couple in their 40s with five children, from Ballyglavin Park, Youghal, Co Cork, had racked up debts of just over £380,000.
They asked for PIA’s approval which would have allowed them to keep their family home.
The PIAs will lead them to cancel approximately €180,000 of their debts.
Under the agreements, the mortgage on their home will be restructured, extended for 27 years and paid off in full.
PIAs will also see them continue to pay off their unsecured debt for the next 15 years.
It was claimed the plans would leave the couple’s debtors in a better position than if the powers were declared bankrupt.
The Circuit Court had refused to approve the couple’s separate PIAs.
The couple, through their personal insolvency practitioner John O’Callaghan, who was represented by barrister Keith Farry, appealed the Circuit Court rulings to the High Court.
The main creditor who had opposed the approval was financial fund Promontoria Scariff DAC, which holds the mortgage on the Powers’ family home, and owes €155,000.
He argued that the proposed arrangements were neither affordable nor sustainable.
The couple’s other unsecured creditors include Cabot Financial Ireland Ltd, Bank of Ireland and a local credit union.
In his judgment, Judge Sanfey said that although there were some minor differences, the couple’s debts were held jointly and that between them they owed approximately €380,000.
The judge noted that Mr Power, who works for a metal recycling company, and Ms Power, who works from home, struggled financially after selling their former family home for far less than they had hoped.
The judge said that the main issues raised in the hearing before him were whether the debtors’ financial status had been properly attested, whether the PIAs were viable given that they would force the powers to live under the directive of the service Insolvency Board of Ireland on reasonable living expenses, and whether the PIAs were prejudicial to the interests of the opposing creditor.
The judge said Promontoria had suggested that, if the PIAs requested by the powers were approved, the family would face a €500 monthly shortfall in their recommended living expenses.
He said he was satisfied from the evidence presented to the court that any shortfall would be “significantly less” than claimed by the opposing creditor.
“It seems to me that the powers have established that, notwithstanding the fact that the arrangement may cause them to live below the recommended living expenses at times, they will be able to arrange their affairs in such a way that they themselves and their children can generate sufficient income to maintain a reasonable standard of living,” he said.
He was further satisfied that the Powers’ financial situation had been properly presented to the court and that the PIAs had not prejudiced the position of the dissenting creditor.
The judge overturned the Circuit Court’s orders and upheld the activation of the powers’ PIAs.