Brendan Burgess
Founder
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This sample scenario is designed to illustrate the features of an interlocking PIA, which is where two individuals have joint and independent debts on their own. (Full details at [broken link removed])
1 . Anne and Barry's story
Anne and Barry are married with a child in Primary School (age 6).
Anne is a Recruitment Consultant and her net monthly income is €2,200. Anne had purchased a two-bedroom apartment prior to marrying Barry. Her apartment is now valued at €180,000 and has an outstanding mortgage of €200,000 with monthly loan repayments of €1,000. Anne also has a credit card debt of €30,000.
Barry is an office worker and his net monthly income is €2,100. Barry had also bought an apartment prior to marrying Anne. Barry’s apartment is valued at €120,000 and has an outstanding mortgage of €140,000 with monthly loan repayments of €780. Barry also has a credit union loan of €20,000.
Neither Anne nor Barry’s apartments are currently rented, despite efforts in recent months to secure tenants.
In 2005 following their marriage, Anne and Barry jointly purchased a 3-bedroom Principal Private Residence (PPR) on a 100% mortgage for €500,000 running until they are 70. Their PPR is currently valued at €300,000. The outstanding balance on the PPR mortgage is €400,000 and repayment is €2,000 per month.
Anne and Barry have co-operated with their Bank under the Central Bank Code of Conduct on Mortgage Arrears in relation to their PPR for the past eleven months, but they have been unable to agree a sustainable repayment solution. Anne and Barry are unable to pay their debts in full as they fall due and acknowledge they are insolvent.
Anne and Barry speak to a Personal Insolvency Practitioner. The PIP advises Anne and Barry that they both meet the eligibility criteria for two PIAs and they should each seek to interlock them.
Summary
|joint |Anne| Barry
Investment property value||€180,000|€120,000
Investment mortgage||€200,000|€140,000
Repayments||€2,000|€780
Credit card||€30,000|
Credit Union|||€20,000
Home value|€300,000
Home mortgage|€400,000
Repayments|€2,000
|
Income||€2,200|€2,100
Reasonable living expenses calculation
|Anne|Barry
Income|€2,200|€2,100
Set costs |€762|€762
Childcare|€250|€250
Available for debt repayments|€1,188|€1,088
Home mortgage|€1,000|€1,000|
Investment mortgage|€1,000|€780
(Deficit)|(€812)|(€692)Anne and Barry are eligible for Interlocking PIAs because
Anne and Barry debts are not all jointly owned.
Potential PIA solution for Anne
Anne and Barry’s mortgage repayments are not sustainable on their current incomes.
Anne and Barry’s joint PPR Mortgage:
The PIP notices that the term of the mortgage cannot be extended since it already runs until Anne and Barry reach 70. Therefore, the PIP proposes that the mortgage interest rate is reduced for the duration of the PIA. Anne and Barry’s monthly mortgage repayment reduces from €2,000 to €1,856 for the duration of the PIA.
Anne’s Apartment:
The PIP reviews evidence supplied by Anne of her unsuccessful attempts to secure a tenant for the apartment, and propose to sell the apartment for €180,000 and repay mortgage in part from proceeds. The shortfall of €20,000 is treated similarly to the unsecured debt in accordance with section 102 (5)1 of the Personal Insolvency Act.
After restructuring
|Anne|Barry
Income|€2,200|€2,100
Set costs |€762|€762
Childcare|€250|€250
Available for debt repayments|€1,188|€1,088
Home mortgage|€928|€928|
Investment mortgage|0|0
Available for unsecured creditors|€260|€160Anne’s monthly disposable income available to make payments to her now unsecured creditors is €260 per month after deducting total set costs and mortgage repayments. This equates to €18,720 over 6 years. (Towards unsecured debts of €50,000 CC + mortgage shortfall)
For the purposes of this scenario, it is estimated that the PIP fees are €6,000 for Anne’s PIA . Therefore, Anne’s unsecured creditors will receive €12,720 on a proportionate basis over the lifetime of the PIA.
Potential PIA solution for Barry
Anne and Barry’s mortgage is not sustainable on their current incomes.
Anne and Barry’s joint PPR Mortgage:
The PIP notices that the term of the mortgage cannot be extended since it already runs until Anne and Barry reach 70. Therefore, the PIP proposes that the mortgage interest rate is reduced for the duration of the PIA. Anne and Barry’s monthly mortgage repayment reduces from €2,000 to €1,856 for the duration of the PIA.
Barry’s Apartment: The PIP reviews evidence supplied by Barry of his unsuccessful attempts to secure a tenant for the apartment, and propose to sell the apartment for €120,000 and repay mortgage in part from proceeds. The shortfall of €20,000 is treated similarly to the unsecured debt in accordance with section 102 (5)1 of the Personal Insolvency Act.
Barry’s monthly disposable income after deducting total set costs and mortgage repayments which is available to make payments to his now unsecured creditors is €160 a month. This equates to €11,520 over 6 years. (Towards €40,000 of unsecured creditors )
For the purposes of this scenario, it is estimated that the PIP fees are €6,000 for Barry’s PIA. Therefore Barry’s unsecured creditors will receive €5,520 on a proportionate basis over the lifetime of the PIA.
Anne and Barry's position after meeting their obligations under the PIA
a) After 6 years the interest rate on the PPR Mortgage reverts back to the original rate (from €1,856 to €2,000 per month) and the mortgage is now sustainable because :
c) Barry will have repaid €5,520 of his unsecured debts at the end of the term of the PIA and the remaining €34,480 is discharged. This represents a 14% return on his unsecured debts, based on amounts outstanding at the date of issue of Barry’s Protective Certificate.
1 . Anne and Barry's story
Anne and Barry are married with a child in Primary School (age 6).
Anne is a Recruitment Consultant and her net monthly income is €2,200. Anne had purchased a two-bedroom apartment prior to marrying Barry. Her apartment is now valued at €180,000 and has an outstanding mortgage of €200,000 with monthly loan repayments of €1,000. Anne also has a credit card debt of €30,000.
Barry is an office worker and his net monthly income is €2,100. Barry had also bought an apartment prior to marrying Anne. Barry’s apartment is valued at €120,000 and has an outstanding mortgage of €140,000 with monthly loan repayments of €780. Barry also has a credit union loan of €20,000.
Neither Anne nor Barry’s apartments are currently rented, despite efforts in recent months to secure tenants.
In 2005 following their marriage, Anne and Barry jointly purchased a 3-bedroom Principal Private Residence (PPR) on a 100% mortgage for €500,000 running until they are 70. Their PPR is currently valued at €300,000. The outstanding balance on the PPR mortgage is €400,000 and repayment is €2,000 per month.
Anne and Barry have co-operated with their Bank under the Central Bank Code of Conduct on Mortgage Arrears in relation to their PPR for the past eleven months, but they have been unable to agree a sustainable repayment solution. Anne and Barry are unable to pay their debts in full as they fall due and acknowledge they are insolvent.
Anne and Barry speak to a Personal Insolvency Practitioner. The PIP advises Anne and Barry that they both meet the eligibility criteria for two PIAs and they should each seek to interlock them.
Summary
Investment property value||€180,000|€120,000
Investment mortgage||€200,000|€140,000
Repayments||€2,000|€780
Credit card||€30,000|
Credit Union|||€20,000
Home value|€300,000
Home mortgage|€400,000
Repayments|€2,000
|
Income||€2,200|€2,100
Reasonable living expenses calculation
Income|€2,200|€2,100
Set costs |€762|€762
Childcare|€250|€250
Available for debt repayments|€1,188|€1,088
Home mortgage|€1,000|€1,000|
Investment mortgage|€1,000|€780
(Deficit)|(€812)|(€692)
Anne and Barry debts are not all jointly owned.
- A PIA, which is proposed for Anne, can reasonably be administered in common with a PIA proposed for Barry because of the financial relationship of Anne and Barry.
- Anne and Barry meet all the other eligibility criteria for two interlocking PIAs (see page 7 of the PIA guidebook for further details of eligibility criteria).
Potential PIA solution for Anne
Anne and Barry’s mortgage repayments are not sustainable on their current incomes.
Anne and Barry’s joint PPR Mortgage:
The PIP notices that the term of the mortgage cannot be extended since it already runs until Anne and Barry reach 70. Therefore, the PIP proposes that the mortgage interest rate is reduced for the duration of the PIA. Anne and Barry’s monthly mortgage repayment reduces from €2,000 to €1,856 for the duration of the PIA.
Anne’s Apartment:
The PIP reviews evidence supplied by Anne of her unsuccessful attempts to secure a tenant for the apartment, and propose to sell the apartment for €180,000 and repay mortgage in part from proceeds. The shortfall of €20,000 is treated similarly to the unsecured debt in accordance with section 102 (5)1 of the Personal Insolvency Act.
After restructuring
Income|€2,200|€2,100
Set costs |€762|€762
Childcare|€250|€250
Available for debt repayments|€1,188|€1,088
Home mortgage|€928|€928|
Investment mortgage|0|0
Available for unsecured creditors|€260|€160
For the purposes of this scenario, it is estimated that the PIP fees are €6,000 for Anne’s PIA . Therefore, Anne’s unsecured creditors will receive €12,720 on a proportionate basis over the lifetime of the PIA.
Potential PIA solution for Barry
Anne and Barry’s mortgage is not sustainable on their current incomes.
Anne and Barry’s joint PPR Mortgage:
The PIP notices that the term of the mortgage cannot be extended since it already runs until Anne and Barry reach 70. Therefore, the PIP proposes that the mortgage interest rate is reduced for the duration of the PIA. Anne and Barry’s monthly mortgage repayment reduces from €2,000 to €1,856 for the duration of the PIA.
Barry’s Apartment: The PIP reviews evidence supplied by Barry of his unsuccessful attempts to secure a tenant for the apartment, and propose to sell the apartment for €120,000 and repay mortgage in part from proceeds. The shortfall of €20,000 is treated similarly to the unsecured debt in accordance with section 102 (5)1 of the Personal Insolvency Act.
Barry’s monthly disposable income after deducting total set costs and mortgage repayments which is available to make payments to his now unsecured creditors is €160 a month. This equates to €11,520 over 6 years. (Towards €40,000 of unsecured creditors )
For the purposes of this scenario, it is estimated that the PIP fees are €6,000 for Barry’s PIA. Therefore Barry’s unsecured creditors will receive €5,520 on a proportionate basis over the lifetime of the PIA.
Anne and Barry's position after meeting their obligations under the PIA
a) After 6 years the interest rate on the PPR Mortgage reverts back to the original rate (from €1,856 to €2,000 per month) and the mortgage is now sustainable because :
- Anne and Barry will no longer have to service their respective apartments’ mortgages.
- Unsecured debts are discharged.
c) Barry will have repaid €5,520 of his unsecured debts at the end of the term of the PIA and the remaining €34,480 is discharged. This represents a 14% return on his unsecured debts, based on amounts outstanding at the date of issue of Barry’s Protective Certificate.