Key Post How the clawback in a PIA works

25 years left at 4.5%

Sell after 10 years when the mortgage balance has been reduced to €145k

Is this correct?

Brendan

My interpretation of Section 103 of the Personal Insolvency Act 2012 is that the bank could only clawback what is realised above the "new" mortgage of €200,000. if the debtor has managed to pay off €55,000 and reduced the mortgage to €145,000, then he keeps that "equity" of €55,000.

Jim Stafford

OK, here is the Act

[FONT=&quot](3) A Personal Insolvency Arrangement which includes terms involving—[/FONT][FONT=&quot][/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot](a) retention by a secured creditor of the security held by that secured creditor, and[/FONT][FONT=&quot][/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot](b) a reduction of the principal sum due in respect of the secured debt due to that secured creditor to a specified amount,[/FONT][FONT=&quot][/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]shall, unless the relevant secured creditor agrees otherwise, also include terms providing that any such reduction of the principal sum is subject to the condition that, subject to subsections (4) to (13), where the property the subject of the security is sold or otherwise disposed of for an amount or at a value greater than the value attri- buted to the security in accordance with section 105, the debtor shall pay to the secured creditor an amount additional to the reduced prin- cipal sum calculated in accordance with subsection (4) or such greater amount as is provided for under the terms of the Personal Insol- vency Arrangement.[/FONT][FONT=&quot][/FONT]

[FONT=&quot](4) Subject to subsections (5) to (13), the additional amount referred to in subsection (3) shall be the lesser of—[/FONT][FONT=&quot][/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot](a) the entire of the difference between the value of the prop- erty on disposition and the value attributed to the secur- ity in accordance with section 105, and[/FONT][FONT=&quot][/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot](b) the amount of the reduction in the principal sum due in respect of the secured debt under the Personal Insolvency Arrangement as referred to in subsection (3)(b).[/FONT][FONT=&quot][/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot](5) For the purposes of subsection (4), any portion of the increase in the value of the property attributable to significant improvements made to (or other measures taken which have made a material con- tribution to the increase in the value of) the property over which the debt is secured which were made subsequent to the valuation of the security for the purposes of the Personal Insolvency Arrangement shall be disregarded in calculating the additional amount payable by the debtor

[/FONT] [FONT=&quot](9) The obligation to pay an additional amount arising by virtue of this section shall not apply where the value of the property on its sale or other disposal is less than the amount of the debt secured by the security (other than any additional amount secured by virtue of subsection (10)) immediately prior to such sale or other disposition of the property.[/FONT][FONT=&quot][/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot](10) Any additional amount payable by virtue of this section shall stand secured in the same manner and with the same priority as the principal sum referred to in subsection (3)(b).[/FONT][FONT=&quot][/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot](11) The obligation to pay an additional amount arising by virtue of this section shall cease—[/FONT][FONT=&quot][/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot](a) on the expiry of the period of 20 years commencing on the date on which the Personal Insolvency Arrangement comes into effect, or[/FONT][FONT=&quot][/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot](b) on the day on which the debtor is scheduled or permitted to fully discharge the amount secured by the security (or such later date as may be specified for so doing in the Personal Insolvency Arrangement) and does so discharge his or her indebtedness,[/FONT][FONT=&quot][/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]whichever first occurs.[/FONT][FONT=&quot][/FONT]