Significant ruling on challenging a creditor’s rejection of a Personal Insolvency Arrangement
By Hilda Mannix
A recent decision of Judge Susan Ryan in the Dublin Circuit Court is likely to have a substantial impact on debtors seeking to enter into a Personal Insolvency Arrangement (‘PIA’) with their creditors.
The decision arose out of KBC Bank’s rejection of a proposal by a couple (made by their Personal Insolvency Practitioner (‘PIP’)) in which a debt in the sum of approximately €740,000, secured on their family home, would be written down to €360,000. When KBC rejected the proposal, the couple sought to bring an application under section 115A of the Personal Insolvency (Amendment) Act 2015 (‘the Act’) for the Court to review KBC’s decision. Section 115A provides that where a PIA is not approved, a PIP may, where so instructed by a debtor in writing and where the PIP believes there are reasonable grounds to do so, apply to the appropriate Court for an order confirming the coming into effect of the PIA. The relevant creditors must be notified of the application and may lodge a notice of objection with the Court. The criteria which must be met before a review is sought are also set out in section 115A, including that the debt the subject of the PIA must be one which is secured by the debtor’s principal private residence.
The application in the present case was opposed by KBC on grounds that the couple lacked standing to bring such an application. Judge Susan Ryan ultimately found in favour of KBC and ruled that section 115A clearly meant that debtors’ PIPs had to apply for such reviews.
The decision, against which the couple were given liberty to appeal, will have a significant impact for debtors seeking to challenge bank vetoes for PIAs, as it is believed that PIPs will be reluctant to bring applications for review, if faced with the risk of an adverse cost order in the event that such applications fail. However, it is arguable that such fears are ill-founded, particularly where a PIP may only bring such applications where they have formed a view that there are reasonable grounds to do so and section 115A specifically provides that the question of costs is a discretionary one for the Court.