Civil servant gets mortgage debt halved after court hears of husband’s gambling addiction

THE High Court has approved a Personal Insolvency Arrangement (PIA) in which a massive €343,785 mortgage debt was reduced by more than half.

The case involves a woman who ran into mortgage arrears because of her husband’s gambling problem.

Permanent TSB had objected to the deal. It argued that the write-down to €160,000, the current agreed market value of the woman’s home, was “draconian”.

Mr Justice Denis McDonald said the woman, a public servant in her forties with net monthly earnings of some €2,900, was separated from her husband and lives with their teenage daughter in the family home.

In a sworn statement, she said her ex-husband moved to Britain in 2015 and makes no contribution towards mortgage repayments or child maintenance.

The couple jointly bought the house in 2005 with a PTSB loan. The woman experienced financial difficulty for the first time in 2007.

She said her husband developed a gambling addiction and borrowed €7,000 from “loan sharks” to place bets.

His debt became too much to repay, the people from whom he borrowed applied increasing pressure for repayment and she borrowed from her sister to do so.

Her husband’s gambling problem became worse and she fell into arrears with the mortgage repayments and incurred other debts.

PTSB took proceedings against her in the Circuit Court. The woman’s Personal Insolvency Practitioner proposed a PIA under which the mortgage debt would be reduced to €160,000.

The €173,785 balance would be treated as unsecured debt and PTSB, and a credit union owed some €3,752, would each get a dividend of 8 cent in the euro of that.

At the end of the PIA’s six year term, the rest of the unsecured debt would be written off.

PTSB voted against the PIA and the credit union voted in favour.

After the Circuit Court rejected PTSB’s objection to the PIA, it appealed to the High Court.

In a recently published judgement, Mr Justice McDonald ruled that the PIA did not unfairly prejudice PTSB.

He said there can be “no question” of any automatic write down of a mortgage debt to the value of the underlying security and the extent of any write down of secured debt is related to affordability.

He concluded there was just about enough evidence to allow him find the woman was unlikely to be able to afford larger mortgage repayments than the €900 provided for in the PIA and thus to conclude the proposed write down “is not excessive”.

The form of “warehousing” of the secured debt proposed by PTSB was not appropriate because it would mean a large debt for the woman at retirement age, he held.

He said it was a “fallacy” for PTSB to suggest that everything above the Insolvency Service of Ireland’s reasonable living expenses can be treated as surplus to the woman’s needs.

The woman’s daughter hopes to go to college and the woman would be doing very well to keep monthly college costs to €550, he said.

While details about possible salary increases for the woman should have been set out, the failure to do so was “not fatal” because, as a public servant, any increases were likely to be “extremely modest”. The court was not entitled, at this stage, to have regard to her pension entitlements.

Mr Justice Donald said PTSB would do better from the PIA than in a bankruptcy. He said the bank has protection if the house is sold in the future at a value higher than the agreed market value and can pursue the woman’s husband over the mortgage debt.