McEnerney v Personal Insolvency Acts 2012 � 2021 (Approved)

Factual and Procedural Background

This was an appeal concerning an application under section 115A(9) of the Personal Insolvency Acts 2012–2021 for approval of a personal insolvency arrangement (“PIA”) intended to resolve the Debtor’s indebtedness while allowing her to remain in her home. The Bank, her only creditor for the application and the holder of security over the property, opposed approval. [1][2]

The Debtor is an unemployed woman aged 60, with ill health, limited mobility and no children. Her home was valued at €295,000, against a mortgage balance of €133,095.58, leaving substantial equity. Her income included a State disability payment and rental income from a room in the property. [3][4][5]

The proposed PIA capitalised the mortgage arrears, reduced the interest rate to 0.50%, extended the mortgage term to 216 months, and provided for interest-only payments during the nine-month PIA followed by estimated monthly repayments of €671.23. [6]

The Circuit Court refused approval on 20 December 2024. The Practitioner appealed to the High Court. During the proceedings, the Bank was substituted for the Former Bank following a transfer of the mortgage. [7][8]

Legal Issues Presented

1. Whether the PIA was affordable and complied with the requirement that the Debtor retain sufficient income to maintain a reasonable standard of living. [9][10]
2. Whether the PIA was sustainable, including in light of contingencies, rental income and the extended mortgage term. [11]
3. Whether the PIA was unfairly prejudicial to the Bank because of the proposed interest rate and the delay or prevention of possession proceedings. [12][13]
4. Whether the proposed voluntary sale and relocation alternative provided by the Former Bank was preferable to the PIA. [14]

Arguments of the Parties

Bank’s Arguments

• The PIA was unaffordable and unsustainable because the Debtor would live below the ISI reasonable living expenses, with no adequate allowance for contingencies and an increased risk of financial difficulty as she aged. [15][16][17]
• The PIA depended excessively on uncertain rental income of €850 per month, and a vacancy or interruption would make the mortgage payments unsustainable. [18][19]
• The mortgage term, extending into the Debtor’s late seventies, was inconsistent with the Central Bank Guidelines. [20][21]
• The 0.50% interest rate was materially below market rates and unfairly prejudicial, producing a substantially lower return than an alternative market rate. [22][23][24]
• The Bank’s true alternative was possession proceedings, and postponing enforcement would prejudice it, particularly because the Debtor might become older and more difficult to evict if the PIA failed. [25][26][27]
• The Debtor could downsize using the equity in her home, assisted by the proposed €15,000 relocation payment. [28][29][30]

Practitioner’s Arguments

• The PIA was the Debtor’s best and sustainable opportunity to resolve her indebtedness and retain her home. Her limited lifestyle, medical card and reduced actual expenditure meant that living below the ISI guidelines was manageable. [31][32][33]
• The Debtor had demonstrated a strong payment history by making mortgage payments of €671.23, the same amount proposed under the PIA. [34][35]
• Arguments concerning future contingencies and increased costs were speculative; house insurance and the modest contingency allowance within the ISI guidelines provided relevant protection. [17][36]
• The rental income was supported by a lengthy history of renting the room, a written agreement and evidence of continuing demand. [37][38][39]
• The interest rate was necessary to make the arrangement affordable, and the Bank had produced no evidence of its funding costs or actual loss. [40][41]
• The true alternative to the PIA was possession proceedings rather than bankruptcy. Sale or relocation would not provide suitable or sustainable accommodation because of the Debtor’s health, mobility needs, local medical care and the cost of housing. [25][42][43]

Table of Precedents Cited

Court's Reasoning and Analysis

The Court identified the statutory balance: the PIA had to offer a reasonable prospect of resolving the Debtor’s indebtedness, enable creditor recovery to the extent her means permitted, preserve her home where reasonably practicable, remain compliant and avoid unfair prejudice. [72][73]

Although the Debtor would remain below the ISI reasonable living expenses, the guidelines were treated as guidelines rather than inflexible minimums. The Court considered her ill health, modest lifestyle, low transport and medical costs, medical card, strong incentive to retain her home and demonstrated ability to make the proposed mortgage payments. [74][51][35][75]

The Court acknowledged that the projected shortfall would continue for the 18-year mortgage term, making the case more difficult than the authorities relied upon. Nevertheless, the evidence showed that the Debtor had limited needs and had consistently managed her finances. The statutory affordability requirement was therefore satisfied in the particular circumstances. [76][77][78]

The absence of a separate financial cushion did not make the PIA unsustainable. The Court rejected reliance on unspecified future contingencies, noted that the ISI framework already included a modest contingency allowance, and found evidence of available balances and house insurance. [79][80][36][81]

The rental income was considered sufficiently reliable. The evidence established rental income at or around €850 since at least 2022, a current written agreement and strong demand for the room in the relevant area. The possibility that the Debtor might later need different accommodation did not defeat the PIA, particularly because sale of the home remained open to her. [82][83][84][70]

The extended mortgage term was not a sufficient reason to refuse approval. A longer term reduced the monthly payment and was necessary to affordability; the Central Bank Guidelines contemplated caution rather than an absolute prohibition on repayment beyond age 70. [85][71][86]

As to unfair prejudice, the Court accepted that 0.50% was unusually low but found that the Bank had provided no evidence of its acquisition or funding costs, actual financial loss or need to obtain replacement funding. The rate was the most the Debtor’s means reasonably permitted and provided a fixed return over the mortgage term. [87][88][89]

The Court rejected the argument that the Bank was unfairly prejudiced by the possibility of later possession proceedings. Protecting homes from enforcement was a central statutory objective, and the prospect that enforcement might become more difficult because the Debtor became older or more unwell was not a valid basis for refusing approval. [90][27][91][92]

The proposed relocation alternative was also rejected. The evidence did not establish that suitable accommodation could be bought or rented locally within the Debtor’s means. The estimated shortfall for the identified properties exceeded €38,000, and the Bank offered no evidence showing how she could obtain that sum. The Court found a real risk of homelessness if the PIA were refused. [93][94][95][96][97]

Holding and Implications

APPEAL ALLOWED; PIA APPROVED. The Court held that the statutory requirements of section 115A were satisfied and ordered that the PIA come into effect. [98]

The direct consequence was that the Debtor could retain her home under the restructured mortgage, while the Bank would recover the secured debt through the approved arrangement. The judgment was expressly dependent on the Debtor’s particular health, mobility, financial and housing circumstances. [99][91][100]

No broader implication beyond the fact-specific approval of this arrangement was identified in the opinion; no new precedent was set.