Introduction

This High Court decision clarifies and sharpens the legal tests governing court approval of Personal Insolvency Arrangements (PIAs) under section 115A of the Personal Insolvency Acts 2012–2024. At its core, the judgment holds that a PIA cannot rely on speculative, long‑deferred “balloon” repayments or interest‑only long tails to manufacture short‑term solvency, and that courts must rigorously assess the debtor’s ability to comply both during and after the statutory term, particularly where secured debt obligations persist far beyond the PIA’s duration.

The case concerned interlocking PIA proposals for spouses Fiona and Andrew Maloney relating to their principal private residence (PPR). The proposals would have converted much of their home loan into a de facto long‑term interest‑only facility with a residual sum to be cleared after 32 years by sale or remortgage of the home (or other speculative sources). The principal questions were:

• whether the proposals were unfairly prejudicial to the mortgagee (s.115A(9)(b));
• whether the debtors were reasonably likely to be able to comply with the terms (s.115A(9)(c));
• whether the arrangements would enable the debtors not to cease to occupy their PPR (s.115A(9)(b)(iii)(II)), and
• whether the terms required payments that would deprive the debtors and their dependants of a reasonable standard of living (s.99(1)(e)).

The High Court dismissed the appeals and refused to approve the PIAs, affirming the Circuit Court’s refusal.

Summary of the Judgment

• Outcome: Appeals dismissed; Circuit Court orders affirmed. Costs to be addressed in the next High Court personal insolvency list.
• Key Holdings:
  • Evidence did not establish compliance with s.115A(9)(c) and (f) and s.99(1)(e) (noted early as s.99(2)(e) but later correctly framed as s.99(1)(e)).
  • The arrangements would create “illusory solvency”: they rely on unaffordable, long‑term commitments and speculative future events (home price appreciation, remortgage capacity, pension lump sums) to clear a large residual balance decades later.
  • The proposals unfairly prejudiced the secured creditor by effectively converting a repayment mortgage into a long‑term interest‑only product with a low fixed rate (3%) and a balloon repayment after 32 years.
  • The court may, and should, assess post‑PIA sustainability when terms affect secured creditors, not just the statutory period.
  • The court had to consider the debtors’ and creditor’s conduct in the two years before the protective certificate (s.119A(10)); the debtors’ poor payment record and unexplained arrears weighed against approval.

Key Facts and Proposed Terms

• Debtors aged 45 and 50; family home valued at €365,000; current mortgage balance €361,000+; arrears of €91,189 (at proof of debt).
• Proposals structured for a one‑year PIA primarily paying practitioner’s fees and a small dividend for unsecured creditors; no mortgage payment for the first 10 months and mortgage interest to “roll up”.
• Post‑PIA mortgage schedule across 32 years:
  • €1,100 monthly payments, dropping to €900 after year 5;
  • Rising to €1,400 between years 12–19;
  • Reducing to €750 for the final 12 years;
  • In substance, “interest‑only” for approximately 17 of the 32 years.
• Residual balance estimated at €303,000 after 32 years to be discharged by sale or remortgage of the home (or other sources).
• Evidence (unchallenged) indicated a monthly shortfall of €132–€622 in the first seven years against reasonable living expenses if the proposed mortgage payments proceeded.
• Possession order obtained by the mortgagee in 2016; sought to execute in 2022. The debtors’ engagement with the lender was limited prior to enforcement efforts. Payments of €1,450 began after the protective certificate, but the prior arrears remained unexplained.

Analysis

Complex Concepts Simplified

• Personal Insolvency Arrangement (PIA): A court‑supervised plan (max 6 years unless extended by consent) to restructure secured and unsecured debts. Unsecured liabilities are primarily addressed during the PIA term; secured debts often continue beyond it, subject to agreed modifications.
• Section 115A application: A mechanism allowing a court to approve a PIA despite a creditor objection if statutory conditions are met (including fairness, affordability, and sustainability).
• Protective certificate: A court order that gives the debtor temporary protection from creditor action while a PIA is formulated.
• Reasonable Living Expenses (RLEs): Benchmarks published by the Insolvency Service of Ireland indicating typical costs for a reasonable standard of living. Courts must have regard to them when judging affordability, though they are not rigid rules.
• Interest‑only mortgage: A loan where repayments cover interest only for a time, with the principal not reducing. If prolonged, this creates a large residual (balloon) to be cleared later.
• Balloon repayment: A large lump‑sum payment due at the end of a loan term. Unless a credible funding source is identified, such obligations are regarded as speculative in insolvency planning.
• Unfair prejudice (to secured creditors): A proposal is unfairly prejudicial if it shifts risk or reduces expected return in a way that is unjustified by the circumstances or by the benefits conferred by the arrangement, such as locking a creditor into an unduly low rate without a viable repayment plan.
• Equity of redemption vs. ability to repay: The value of the security (house value minus debt) cannot substitute for proof that the debtor can and will meet repayments. Security value is not performance.

Practical Takeaways for Practitioners and Debtors

• Demonstrate affordability beyond the PIA term where secured debts are restructured; provide robust, evidence‑based projections (not generic “set‑costs” estimates).
• Address RLEs honestly: long‑running deficits undermine approval; show how the household will actually meet living costs over time.
• Explain arrears history and pre‑certificate conduct; provide documentation of engagement efforts and reasons for prior non‑payment.
• Avoid reliance on speculative end‑term events (asset appreciation, remortgage availability, pension lump sums) unless underpinned by concrete evidence and credible mechanisms.
• Consider longer statutory durations, where appropriate, to build a track record of compliance and to credibly service secured debt within a sustainable budget.
• When altering interest rates or loan terms, justify the economic fairness to the secured creditor over the entire horizon.

Conclusion

Maloney & Anor clarifies that s.115A approvals are not a vehicle for short‑term solvency theatre. Courts will interrogate the full life‑cycle of secured‑debt restructures proposed within PIAs and will refuse approval where affordability is illusory, living standards are compromised, or creditor interests are unfairly prejudiced by speculative deferments and long, low‑rate interest‑only tails.

The decision re‑centres three core principles: evidence‑based long‑term sustainability, a preserved reasonable standard of living, and fair treatment of secured creditors. It also highlights the importance of debtor conduct in the pre‑certificate period, and leaves open an important question about whether sale‑at‑term models can be reconciled with the statutory imperative that debtors not be required to cease occupying their PPR. Going forward, proposals will need to do more than clear a one‑year hurdle; they must convince the court that compliance will endure and that the arrangement is substantively fair and workable in the real world.