Personal Insolvency – Section 115A Personal Insolvency Act 2012 – 2015 (the “Act”), Key Provisions and Important Case Law

Section 115A of the Act affords debtors an opportunity to have Personal Insolvency Arrangements (“PIA”s), rejected by creditors, reviewed by the Court under certain circumstances. This provision limits the extent to which a creditor can veto a PIA and offers additional hope to debtors wishing to secure a debt write down under an approved arrangement resulting in their likely retention of the family home.

Section 115A states; where (a) a proposal for a PIA is not approved and (b) the debts that would be covered by the proposed PIA include a relevant debt, the Personal Insolvency Practitioner may, where he or she considers that there are reasonable grounds for the making of such an application and if the debtor so instructs him or her in writing, make an application on behalf of the debtor to the appropriate court for an order approving the previously rejected PIA.

Recent High Court decisions have provided some clarity on this developing area of law and have resulted in the overturning of multiple rejections by creditors of PIAs. Significant case law considerations, include the following:

  • Hill & Personal Insolvency Acts [2017] IEHC 18: Section 115A defines ‘relevant debt’ – i.e. a debt secured on the debtor’s PPR, for which debtor was in arrears on 1 January 2015 or having been, before 1 January 2015, in arrears, entered into an alternative repayment arrangement;
  • Hickey & Personal Insolvency Acts [2017] IEHC 20: Application must be made not later than 14 days after the creditors’ meeting. For example, if a creditors’ meeting is held on 16 December, the application must be made on or before 29 December;
  • Featherson & Personal Insolvency Acts [2018] IEHC 683: In consideration of whether to make an order, regard to be given to conduct of debtor regarding making of repayments in two years prior to Protective Certificate and of creditor seeking to recover debts due;
  • Hayes, a debtor [2017] IEHC 657: Regarding unfair prejudice; whether a proposal is unfair must also have regard to the stated statutory objective which is contained in Section 115A but also in the earlier Section 104, that a proposed PIA should insofar as this is practical, seek to preserve the occupancy or ownership by a debtor of his or her PPR. A proposed PIA is not of itself unfairly prejudicial merely on account therefore of the fact that the likely return on bankruptcy could be marginally better. Equally, the court in considering whether a proposed PIA is unfairly prejudicial must examine the actual circumstances of the creditor. In the present case a particular focus of the argument arose from the evidence adduced on the part of the creditor regarding likely lending rates in the Irish market in the near and not so near future. It was held that the creditor was not in fact a lender and accordingly the test of unfair prejudice regarding its interest must be seen in the light of investment returns and not the cost of the capital needs of the creditor in the future;
  • JD & Personal Insolvency Acts [2017] IEHC 119: The creditor argued unfair prejudice with regard to the enforcement of its security interest in the premises but this was not accepted. The prejudice to the creditor will be caused, not by the fact that Mr. R has not been brought into the restructured arrangement but by the extent of the negative equity and not by virtue of any unfairness arising from Mr. R’s non-involvement with the process. The Court, held that the proposed PIA was not unfairly prejudicial to EBS, contained repayment provisions which are reasonably likely to be met by the debtor and preserved the entitlement of the debtor to continue to reside with her young children in her PPR. It did not deprive the secured creditor of any claims against a co-debtor or co-mortgagor.

Brady Kilroy