Background
Gemma McEnerney, an unmarried 60-year-old woman who was unemployed, in ill health and of limited mobility, sought court approval under section 115A(9) of the Personal Insolvency Acts 2012–2021 for a personal insolvency arrangement that would permit her to remain in her Dublin home. Her mortgage balance was approximately €133,096 against a home valued at €295,000. Her income consisted principally of an invalidity pension and payments from lodgers.
The arrangement would capitalise the mortgage arrears, fix interest at 0.5%, extend the mortgage term to 18 years and require interest-only payments during the nine-month arrangement, followed by estimated monthly capital-and-interest payments of €671.23. The secured creditor would receive the debt in full. Ulster Bank, later replaced by Allied Irish Bank, opposed the arrangement on affordability, sustainability and unfair-prejudice grounds. The Circuit Court refused approval, and the personal insolvency practitioner appealed.
The Court’s Holding
Ms Justice Nessa Cahill allowed the appeal and approved the arrangement. Although it would leave McEnerney below the Insolvency Service of Ireland’s guideline reasonable-living-expense figures, those figures were guidelines rather than inflexible minimums. McEnerney’s modest lifestyle, medical card, social-welfare entitlements and payment history supported the conclusion that she was reasonably likely to comply. The statutory test required a reasonable likelihood of sustainability, not certainty against every future contingency.
The Court also held that the arrangement did not unfairly prejudice AIB. The 0.5% rate was unusually low, but AIB had produced no evidence of actual harm from it, the proposal reflected the most McEnerney’s means reasonably permitted, and the Bank remained protected by substantial equity in the property. Possession proceedings, rather than bankruptcy, were the realistic alternative. The Court rejected the contention that delayed enforcement would be unfair because repossession might become harder as McEnerney aged and her health deteriorated.
The Bank’s proposed voluntary sale and €15,000 relocation payment did not establish a viable housing alternative. The identified properties were unsuitable and beyond McEnerney’s available funds, and the assertion that she could raise an additional shortfall was unsupported. Given her health, need for adapted ground-floor accommodation and proximity to medical care, refusal of the arrangement created a real risk of later homelessness.
Key Takeaways
- A debtor may be left below the guideline reasonable-living-expense level where the evidence shows that the arrangement remains affordable in the debtor’s particular circumstances.
- Sustainability under section 115A requires a reasonable prospect of compliance, not a guarantee against all future financial or personal contingencies.
- A low fixed interest rate is not necessarily unfairly prejudicial where it reflects the debtor’s means and the creditor supplies no evidence of actual financial harm.
- A creditor proposing sale or repossession should substantiate the availability, suitability and affordability of alternative accommodation.
Why It Matters
The judgment illustrates the fact-sensitive balance required when a court is asked to impose a personal insolvency arrangement over a secured creditor’s objection. Guideline expenses, market interest rates and theoretical alternatives inform the analysis, but they do not displace the statutory objectives of restoring the debtor to solvency and, where reasonably practicable, preserving occupation of the home.
It also shows that assertions of unfair prejudice require evidence. Here, the creditor’s secured position, the debtor’s substantial equity and the absence of a demonstrated viable housing alternative outweighed the creditor’s concerns about delayed enforcement and the arrangement’s unusually low interest rate.