What are the clawback provisions if a house is sold after a PIA?

[Brendan Burgess]

I am trying to understand Section 103 of the Act.

[FONT=&quot](3) A Personal Insolvency Arrangement which includes terms involving—[/FONT]

[FONT=&quot](a) retention [of the family home][/FONT]

[FONT=&quot](b) a [write down of the mortgage][/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](11) The obligation to pay an additional amount arising by virtue of this section shall cease—[/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]

 

[Brendan Burgess]

This is very difficult to understand, but is this correct?

Under a PIA, the amount outstanding on a mortgage is written down from €300k to €200k, the value of the house.
Amount of write off €100k

Date PIA comes into effect 1 Jan 2014. If the house is sold before 31 Dec 2033...

House sold for |€200k|€250k|€400k
Increase|0|€50k|€200k
Clawback|0|€50k|€100k

 

[Brendan Burgess]

In the Sunday Times article, Paul Carroll said


"If they sold their home during a PIA for more than the amount owing on their mortgage, the bank would be entitled to up to half the difference. However, if they delayed the sale until the PIA is complete, there would be no clawback"

Where does this come from?

 

[Dr.Debt]

Brendan

I concur with your interpretation of that section of the act.

Any write down of a loan, secured on a debtor's home (as part of a PIA agreement) can be revisited by the Creditor when the property is being disposed of, within a twenty year window and a clawback up to the value of the initial writedown on the loan will be forthcoming at that time.

 

[Brendan Burgess]

Thanks Dr D

That is what I thought but it seems that commentators are ignoring it. Maybe it's written in such a way in the Act, that people don't understand it.

Brendan

 

[Jim Stafford]

Brendan

I partially agree with your interpretation.

Section 103 is one of the most tricky, complex provisions of the Act (extending to 13 sub sections and more than 2 pages.) For example, (5) states that any increase in value due to significant improvements shall be disregarded in calculating the additional amount payable. (6) states that (5) shall not apply unless the secured creditor has given his consent to the improvements, but consent shall not be unreasonably withheld. I can envisage a situation where a developer adds €1m of value to a site by getting planning permission, and keeping the €1m!

(11) states that the obligation to pay the additional amount could cease on the date debtor is permitted to fully discharge the debt, and so discharges the debt etc

Jim Stafford

 

[Brendan Burgess]

[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]

I took section (b) to mean that the debtor pays off the full amount secured. So if I have a mortgage of €300k and it's reduced to €200k by a PIA, it is discharged if I pay off the €300k in full.

Though if that is correct, why would a later date be specified?