One of the reasons I became a PIP was to clearly understand all the options that are available to someone when they are in financial difficulty.
In a recent case that was referred to us it was clear from our initial review that the only way the couple could retain occupation of their family home was through the Mortgage to Rent scheme.
This was because they were in the mid 50’s, in poor health and their only source of income was from social welfare. Due to this they unfortunately built up significant arrears on their family home loan. They had been through the Mortgage Arrears Resolution Process (MARP) with their bank and following this review there was no solution available to restructure this loan.
They also had historical residual debts with other banks and revenue due to the failure of their business following the last recession. They also had residual debts owing to another bank following the sale of a number of Investment Properties.
Their only option to resolve their insolvent financial position and return them to solvency was through a Personal Insolvency Arrangement (PIA).
As their only source of income was from social welfare, they were unable to offer a dividend to their unsecured creditors over the standard 6-year PIA term or make a contribution towards the family home loan.
As part of their PIA and to avoid them having to leave their family home they were required to seek approval to enter the Mortgage to Rent Scheme. As part of their MTR arrangement their family home would be purchased by the Local Council. They would then enter a tenancy agreement with the Council in which they would pay a nominal rent to the Council based on their affordability. The certainty that they get from entering an approved MTR is that it allows them to occupy their family home for the rest of their lives.
The remainder of the residual debts due was resolved by offering a lump sum payment to their unsecured creditors. As part of their PIA Revenue agreed to ‘opt in’ to have their debt treated as unsecured. This lump sum payment was funded by family members.
This arrangement is known as an ‘Accelerated PIA’ and once the lump sum is paid within the 12-month term the remainder of the outstanding debts were written off.
The above is a summary of a recent case we have completed on behalf of our clients.
If you have any queries on the above please contact me.
Banking and Insolvency Partner
Mark Ryan is authorised by the Insolvency Service of Ireland to carry on practice as a personal insolvency practitioner.