Background of the Callaghan Case

The couple reside in a 3 bedroom semi-detached property with their 3 young children.  The couple had a mortgage with KBC for €285,647 for their family home which was valued at just €105,000.

PIP’s Proposal

The PIP proposed a reduced interest rate of 2.5% from 4.5% for the period of the PIA and thereafter reverts to 4.5% for the remainder of the mortgage.  The mortgage to be extended by 6 years until Mr. Callaghan reached 70 years of age and a write off of €165,647.

KBC’s Proposal

The bank proposed  to split the debt into an active and warehoused mortgage of €135,000 each and a write off of €15,647.  As part of the proposal the warehoused mortgage would carry 0% interest and the couple could reside in the home for the rest of their lives.

Baker Ruling

The Judge ruled in favour of the couple and rejected the warehousing of €135,000 as the warehoused is not proportionate to, or reasonably derived from, the current income and capital assets, or any future ascertainable means.  The Judge confirmed that warehousing of a mortgage debt is permissible in principle, but it was not reasonable in the circumstances of this case.

To read the full judgement please click on the link here

The Oireachtas Joint Committee on Justice, Defence and Equality has recently recommended to the Minister for Justice and Equality that the bankruptcy term (already reduced under the 2012 Act from 12 years to 3 years) be further reduced to 1 year. That Committee also recommended that, if the term is reduced to 1 year, the Official Assignee be given the ability to apply to extend that reduced term from 1 year to 3 years where, for instance, there is excessive unsecured debt or the bankrupt has not worked cooperatively with the Official Assignee.

It is hoped this recommendation is agreed by the Government and introduced into law as soon as possible.