Court refuses Personal Insolvency Arrangement confirmation due to lifetime mortgage terms failing to resolve indebtedness.

Record No: C:IS:DUBL:2023:001455 Neutral Citation: [2026] IECC 1

THE CIRCUIT COURT AN CHUIRT CHUARDA

DUBLIN CIRCUIT COUNT OF DUBLIN

IN THE MATTER OF PART 3 CHAPTER 4 OF THE PERSONAL INSOLVENCY ACTS, 2012 - 2021

AND IN THE MATTER OF DAVID KENNA OF HILTON LODGE, BALLINTEER AVENUE, DUBLIN 16 (“THE DEBTOR”)

AND IN THE MATTER OF AN APPLICATION PURSUANT TO SECTION 115A(9)

OF THE PERSONAL INSOLVENCY ACTS 2012-2021

Judgment of His Honour Judge Meehan delivered on the 23 February 2026

1. By Notice of Motion returnable 17 June 2024 (“the Application”), the Personal Insolvecy Practitioner, Eugene McDarby (“the PIP”) applied for an order pursuant to the provisions of Section 115A(9) of the Personal Insolvency Acts 2012 to 2021 (“the Acts”), approving a Personal Insolvency Arrangement (“the PIA”). By Notice of Objection dated 7 May 2024, Pepper Finance Corporation Ireland DAC (“Pepper”) contested the Application.

2. The hearing commenced on 15 October 2025. An issue arose as to whether the court should make an order confirming the coming into effect of the proposed PIA, where that PIA contains “lifetime clauses” as set out below (paragraph 7). The court requested written submissions from the parties on that issue. These submissions were delivered in early January 2026. The hearing reconvened on 14 January 2026.

The Personal Insolvency Arrangement

3. A creditors’ meeting considered the PIA on 28 March 2024. The Revenue Commissioners with a preferential debt of €1,838.86 and Cabot Financial Ireland Limited (“Cabot”) with an unsecured debt of €7,141.88 both voted in favour of the PIA. Pepper voted against.

4. The PIA contains a summary at Part I. The Debtor is 59. His most significant asset is his Principal Private Residence (“the PPR”) at Hilton Lodge, Ballinteer Avenue, Dublin 16, D16 K1K6. The current market value of the PPR is €550,000. The mortgage balance is €254,629.22. There is therefore €295,370.78 equity in the PPR. Pepper is the PPR creditor. The only other asset is the Debtor’s vehicle, valued at €3,500. It is required for personal use.

5. The PIA summary sets out: the Debtor’s total net monthly income is €2,505.80; set costs are €1,383.95 per month; rent/mortgage payments are €624.81 per month;

and additional expenditure is €172.38 per month. According to the PIA Summary, this leaves a contribution available of €2,181.14 per month. That calculation is incorrect. This may be because the input figures are wrong or there is a miscalculation or both.

6. According to the PIA Summary, the Debtor will make 36 monthly payments of €324.66 (total €11,687.76) into the PIA. That money is to be used to discharge PIP fees and to pay dividends to Revenue and Cabot.

7. Part IV of the PIA proposes a mortgage restructure of Pepper’s secured debt as follows:

“2.1.1 The current arrears will be capitalised.

2.1.2 The term of the mortgage will be extended to 264 months or as reduced/extended as per the following clauses; A) The term of the loan (as set out above) is to be extended for the duration of the normal life expectancy of the Debtor (based on inter alia average life expectancy as per the current Central Statistics Office Life Expectancy figures (Irish Life Tables 2015-2017). B) The term specified at clause 2.1.2 above may vary (if required) in accordance with any time period taken in order to have the PIA approved; be it section 115 or 115A approval.

C)If the Debtor dies prior to the end of the term of the loan then the loan will terminate on death. Death of the Debtor will be considered a full default and termination. The remaining balance will be discharged from the Debtor’s Estate, by the Executor and/or from the sale of the asset. The debt may also be cleared by other agreement reached between the creditor and the relevant party and the herein terms are not to limit any alternative resolution. D)If the Debtor exceeds the specified term of the loan in the PIA then the term of the loan will be extended and payment terms will continue until the death of the Debtor.

In the event of such extension, all other terms remain. The loan will both terminate and default on death. The remaining balance will be discharged from the Debtor’s Estate, by the Executor and/or from sale of the asset. E) Interest will accrue (at the rate specified) and be rolled up (and added to the principal balance) from date of death to the date of sale, and will be due and owing and will be discharged from the sale of the asset. F) Any further terms (if needed) regarding the administration of the sale/realisation of security can be agreed between the PIP/Debtor/creditor.

In default of any further terms, conditions or matters not specified by the herein terms, any issues on death are to be determined by the terms and conditions of the original letter of offer governing the original drawdown and repayment terms of the loan and underlying mortgage security and/or standard creditor policy on death. G) On the termination of the Agreement (be it default and/or death) the creditor will be entitled to pursue such legal remedy against the Debtor and/or his/her Estate/Executor as it deems appropriate (including but not to proceedings for judgment in the sum of the balance then outstanding and/or proceedings for possession of the property).

H) The mortgage (and debt/loan) will remain secured against the property until sale or until the entire debt is discharged in full, whichever occurs first.”

8. The PIA therefore provides for an interest only mortgage term extension to the Debtor’s death, whenever that occurs. The principal is to be repaid after that. The clauses setting out that feature of the mortgage restructure have been referred to throughout as the “Lifetime Clauses”. That terminology will be used throughout this judgment.

9. The Lifetime Clauses are set out at clause 2.1.2. The term of the mortgage is to be extended to 264 months or as varied by the clause. That term is to be extended for the duration of the Debtor’s normal life expectancy “based on inter alia average life expectancy as per the current Central Statistics Office Life Expectancy figures (Irish Life Tables 2015-2017)”. If the Debtor dies before then “the remaining balance will be discharged from the Debtor’s Estate, by the Executor and/or from the sale of the asset”. If the Debtor survives beyond then, the mortgage term will be extended to the death of the Debtor. Whenever the Debtor dies, the remaining balance is to be discharged from the Debtor’s estate and/or from the sale of the asset.

10. The Debtor will make interest only payments for the entire term of the restructured mortgage (i.e. until he dies). The interest rate will be fixed at 3% for the 3-year term of the PIA. Thereafter it will be the ECB rate with a 0% margin for the remainder of the restructured mortgage term.

11. Put simply, the Debtor is to make interest only payments until his death, whenever that occurs. Then, the principal sum of €267,308.29 is to be paid from his estate “by the Executor and/or from the sale of the asset”.

The “Lifetime Clauses” Issue

12. Pepper argues that the Lifetime Clauses are “not permissible” (para. 1(b) Pepper submissions) for two reasons.

13. Firstly, Pepper submits that the court may not make an order confirming the coming into effect of the PIA because it cannot be satisfied that the Debtor is reasonably likely to be able to comply with the terms of the PIA as required by section 115A(9)

(c).

14. The essence of the objection is set out in Ms Loftus’s Affidavit in Support of Objection sworn on 30 July 2024.

“b) The extended mortgage term will expire after the death of the Debtor. I say and am so advised that it is a requirement of Section 115A(9)(c) of the Act that the Debtor be reasonably likely to be able to comply with the arrangement. Given he will be deceased, the Debtor will not be able to comply with the terms of the PIA. I say and am so advised that the statement in the PIA that the mortgage loan facility will be discharged by the Debtor’s estate cannot be regarded as a legally enforceable commitment which is an integral part of the arrangement. This does no more than state the existing position at law. It imposes no obligation on those who will administer the Debtor’s estate after his demise and it confers no benefit on the Respondent, simply leaving the Respondent in the position it would have been in if the Debtor at any point became unable to perform his obligations under the arrangement.”

15. Pepper relies on Re Fennell [2021] IEHC 297 where the proposed term of the restructured mortgage significantly exceeded the debtor’s life expectancy. The High Court (Sanfey J) found that the debtor was not reasonably likely to comply with the terms of the PIA due to her likely death before the end of the restructured mortgage term.

16. In the present case, the PIA anticipates that the Debtor’s estate shall pay the balance due on the date of death plus interest months or years after his death from the proceeds of sale of the secured asset. Pepper argues that this arrangement falls foul of Re Fennell because the obligations under the PIA continue past the Debtor’s death. Interest will continue to accrue, the security will remain in place and the obligation to repay the loan balance will continue after the Debtor’s death until the property is sold and the loan repaid. Thus, Pepper argues, the Debtor is not reasonably likely to comply with the terms of the PIA.

17. The PIP argues that Re Fennell is authority for only one proposition: the inability to propose an extension of the term of the loan beyond life expectancy in a 115A application (para. 32 PIP submissions). The PIP submits that the primary impediment to approval in Re Fennell was the court’s inability to satisfy the statutory test under Section 115A(9)(c): that the debtor is reasonably likely to comply with the terms of the proposed arrangement.

18. The PIP submits that the present PIA is different because the Debtor’s age at the

conclusion of the term (79) falls within his life expectancy whereas the age in Re Fennell (98) did not.

19. Secondly, Pepper submits that where the PIA anticipates that the Debtor will die with a significant debt outstanding, the PIA does not enable the Debtor to resolve his indebtedness within the meaning of s. 115A(9)(b)(i). It argues that Re Callaghan [2017] IEHC 332 establishes that a PIA which proposes warehousing a debt to the end of an extended mortgage term will not be approved unless the debtor will be in a position to repay the debt at the end of the warehousing. Pepper submits that the present PIA effectively proposes to warehouse debt until after the Debtor’s death.

20. The PIP’s submissions argue that the terms of the PIA are “permissible” (paras. 19

– 31). The PIP states correctly that PIAs involving mortgage term extensions far beyond life expectancy are often approved under section 115. Such arrangements are permissible per Re Kirwan [2021] IEHC 327.

21. The PIP argues that the provisions of the Act that enable the drafting of a PIA do not change in section 115A.

22. In Re Callaghan, the creditor objected to a PIA involving a debt write down. The creditor argued that the PIP should have considered its counterproposal; a split mortgage where part of the debt was warehoused until the debtors died. The PIP in that case argued that deferring debt beyond the term of the PIA and until after death was not permissible. The PIP in the present case submits that Re Callaghan establishes that the term of the mortgage “may be extended for many years, including to a time after the death of a debtor”.

Discussion

23. The PIP submission that PIAs involving mortgage term extensions far beyond life expectancy are often approved under section 115 and that such arrangements are permissible per Re Kirwan is of limited assistance. It is only where a proposal is not approved in accordance with Chapter 4 of the Act (including under section 115)

that a PIP may make an application pursuant to section 115A(9).

24. Many arrangements are approved, often with the agreement of all parties under section 115. This was the case in Re Kirwan:

“14. However, at the creditors' meeting held under s.106 of the Act on 20th March, 2020, the unsecured creditors present and voting — €21,536.37 out of a possible €24,779.83 – voted in favour of the arrangement. No unsecured creditor voted against it. The only secured creditor, Start, voted in favour of it. There was therefore unqualified support from the creditors for the arrangement, notwithstanding the fact that the unsecured creditors would have been paid in full if the debtor had been adjudicated.

15. Likewise, when the matter came before the Circuit Court in June 2020, no creditor opposed the application by the PIP for an order for approval of the coming into effect of the arrangement. The Circuit Court appears to have expressed a concern that, at the end of the 420-month term when the debtor would be aged 90, she would not be solvent or have secured continued occupation in the property, given that the outstanding balance of the mortgage would then be payable. The court adjourned the s.115 hearing to allow the PIP to respond in relation to these issues.”

25. This does not mean the same PIA will be imposed on an objecting creditor by a court exercising its jurisdiction under section115A(9). It is a different test from that the High Court applied in Re Kirwan.

26. Re Callaghan is also distinguishable from the present case. The circumstances were materially different. There, in a contested section 115A application, the creditor argued that the proposed “negative equity write-off” was unfairly prejudicial to its interests and did not enable it to recover its debt to the extent that the means of the debtor reasonably permitted. The creditor pointed to its alternative proposal made under s. 98(1) and s. 102(1) of the Act. That counter proposal was that part of the debt would be warehoused until after the debtors died.

27. In defending its non-adoption of the proposal, the PIP argued that it was impermissible to warehouse debt until after the debtor died. The High Court found that it would have been permissible for the PIP to adopt the counterproposal.

28. However, a proposal made under s.98(1) and s.102(1) is made before the PIA is formulated. The PIP is then required to consider any such submission in formulating a PIA. This is at a point in the process before the creditor’s meeting and long before any section 115A application is made. The High Court (Baker J)

stated (at para. 14):

“14. Section 98 of the Act permits a secured creditor to make a proposal or a counterproposal for the treatment of its debt. No equivalent provision is found with regard to unsecured liabilities. A PIP is required to have regard to such preferences in formulating a proposal for a PIA. The requirement is not that the PIP should incorporate such express proposals, but s.102(2)(b) mandates that a PIIP have regard to such preferences to the extent that it is reasonable to so do:

(2) In formulating the proposal for a Personal Insolvency Arrangement the personal insolvency practitioner shall—

(a) have regard to subsection (3) and sections 103 to 105, and

(b) to the extent that he or she considers it reasonable to do so, have regard to the preference of the secured creditor furnished under subsection (1) as to the treatment of the security and the secured debt.”

29. The High Court went on to consider the types of provisions that may be incorporated into a proposal for a PIA to deal with payment to creditors. It concluded, on this point (para 39) that the secured creditor and the debtor can agree “any agreed alteration on the payment terms” including warehousing:

“39. There are no limitations in the statutory provisions as to the conditions that may be included in a restructure of a secured debt, and what is envisaged is any agreed alteration to the repayment terms, including, it seems to me, an arrangement by which the term of the mortgage may be extended for many years, including to a time after the death of the debtor. There is in my view nothing in ss.

99 or 100 of the Act which precludes the splitting of the mortgage debt and the warehousing of part of the debt.”

30. The High Court found that it would have been permissible for the PIP to adopt the counterproposal at that stage. However any such PIA would still have been required to be approved by the creditor’s meeting and then by the court pursuant to section 115. Re Callaghan does not mean that if warehousing is proposed in a PIA, and if that PIA is rejected by the secured creditor and if that PIA is the subject of a section 115A application, that the PIA will be approved under that provision.

Re Callaghan simply establishes that it is permissible for a PIP to include warehousing when formulating a PIA.

31. The difficulty for the PIP, in relying on both Re Callaghan and Re Kirwan, is that, even if it is permissible to include a provision when formulating a PIA; it does not necessarily follow that that a court will approve the same provision when contested under section 115A. It is a different test.

32. The test is set out in section 115A(9):

“(9) The court, following a hearing under this section, may make an order confirming the coming into effect of the proposed Personal Insolvency Arrangement only where it is satisfied that—

(a) the terms of the proposed Arrangement have been formulated in compliance with section 104,

(b) having regard to all relevant matters, including the terms on which the proposed Arrangement is formulated, there is a reasonable prospect that confirmation of the proposed Arrangement will—

(i) enable the debtor to resolve his or her indebtedness without recourse to bankruptcy,

(ii) enable the creditors to recover the debts due to them to the extent that the means of the debtor reasonably permit, and

(iii) enable the debtor—

(I) not to dispose of an interest in, or

(II) not to cease to occupy,

all or a part of his or her principal private residence,

(c) having regard to all relevant matters, including the financial circumstances of the debtor and the matters referred to in subsection (10)(a), the debtor is reasonably likely to be able to comply with the terms of the proposed Arrangement,

(d) where applicable, having regard to the matters referred to in section 104(2), the costs of enabling the debtor to continue to reside in the debtor’s principal private residence are not disproportionately large,

(e) the proposed Arrangement is fair and equitable in relation to each class of creditors that has not approved the proposal and whose interests or claims would be impaired by its coming into effect,

(f) the proposed Arrangement is not unfairly prejudicial to the interests of any interested party, and

(g) other than where the proposal is one to which section 111A applies, at least one class of creditors has accepted the proposed Arrangement, by a majority of over 50 per cent of the value of the debts owed to the class.”

33. In the present case, there are two questions to consider. The first question is whether the court is satisfied, having regard to all relevant matters that the Debtor is reasonably likely to be able to comply with the terms of the PIA. Pursuant to section 115A(9)(c), the court may only make the order if it is so satisfied.

34. The proposal in Re Fennell was similar, although not identical to the present case.

There, the PIA provided for an extension of the mortgage term to a point at which the debtor would be aged 98 and likely have died. The High Court (Sanfey J) found that the debtor “was not reasonably likely to be able to comply with the terms of the arrangement”, having regard to his age and circumstances (at para. 129).

“129. As will be clear from the foregoing, my primary conclusion is that the debtor is not “reasonably likely to be able to comply with the terms of the proposed arrangement”. In particular, it is my view that, where the restructured term over which payments are to be made is of such duration that the court, having regard to the age and circumstances of the debtor, is not satisfied that the debtor is “reasonably likely to be able to comply with the terms of the proposed arrangement…”, the court cannot entertain an application pursuant to s.115A(9) in respect of such arrangement. Neither am I satisfied that the debtor has demonstrated that the repayments under the PIA are in any event affordable or sustainable.”

35. As in the present case, the PIA in Re Fennell provided for the debtor’s estate to repay the objecting creditor after the debtor’s death. The High Court (at para 113)

described the proposal as follows:

“113. As set out at para. 7 above, Clause 2.3.1.9 does expressly provide that, if the debtor does not survive until the end of the restructured mortgage term, “…her estate will repay the remaining balance owing on the secured debts to Ulster Bank from the sale of the home”. However, I do not think that this can be regarded as a legally enforceable commitment which is an integral part of the terms of the arrangement. As counsel for the bank pointed out, the clause “does no more than state the existing position at law”. It imposes no obligation on those who will administer the debtor's estate after her demise, and it confers no benefit on the objecting creditor, simply leaving the bank in the position it would have been in if the debtor at any point became unable to perform her obligations under the arrangement.”

36. Commenting on this paragraph, Judge Connolly of the Circuit Court in Re McMahon (Record No C:IS::NRCN:2022:000346) stated:

“In his judgment in Re Fennell, Sanfey J. appears to have found, as a matter of law, that a clause which simply nominates the estate of the debtor to meet any post-death residual debt, should not be tolerated.”

37. The present PIA seeks to avoid the difficulty posed by Re Fennell by providing that the mortgage term extends only to the death of the Debtor, whenever that occurs.

Therefore, it is argued, it cannot be said to be of such duration that the court, having regard to the age and circumstances of the debtor is not reasonably likely to be able to comply with the terms of the PIA. The restructured term does not extend beyond the lifetime of the Debtor. The Debtor is reasonably likely to make the payments up to that point. However this does not deal with the entire issue.

38. A crucial feature of the PIA (and the Re Fennell PIA) is that it requires the Debtor’s estate to repay the balance owing to Pepper from the sale of the PPR after the Debtor’s death. Clause 2.1.2 (C) and/or (D) provide that this term of the PIA will be performed by the executor. There is no possibility (or reasonable likelihood) of the Debtor being able to comply with that term – rather it is the executor.

39. This imposes no obligation on those who will administer the Debtor’s estate after his demise. It confers no benefit on Pepper. Similar to the equivalent parties in Re Fennell, Pepper and the Debtor’s estate will be left in the positions they would be in if the Debtor at any point became unable to perform his obligations under the arrangement.

40. Re Fennell makes it clear that “such an arrangement is not permissible”.

“130. It does seem to me that it would be worthwhile for a debate to take place among all the relevant stakeholders as to whether it would be beneficial, in the sense of being in accordance with the scope and intendment of the Act, if the legislation were to permit a situation whereby a PIP could propose the reduction of the repayments by a debtor over a restructured term to a level of affordability, notwithstanding that the term was likely to be extended beyond the lifespan of the debtor, providing the PIP could establish by evidence that such payments were sustainable, and particularly where the debtor's mortgage is in positive equity, such that the PPR lender – as in the present case – would be likely to recover its debt in full on the demise of the debtor.

Careful consideration would have to be given to the implications of such an arrangement for the affected secured creditor, which would no doubt raise numerous concerns, such as those raised by the objecting creditor in the present case.

131. As this judgment makes clear, such an arrangement is not permissible, as the court cannot be satisfied, where the term of the restructured loan is likely to exceed the lifespan of the debtor, that the debtor is “reasonably likely to be able to comply with the terms of the proposed arrangement”. An amendment to the Act would in my view be required in order to permit the possibility of such an arrangement, and to set out the terms upon which such an arrangement could be effected. However, the primary aim of the restructure of a mortgage term beyond the lifetime of the debtor is to ensure the affordability of the repayments, and to secure the continued residence of the debtor in the PPR. As such, a discussion among affected parties would be welcome to examine whether such a solution along these lines to the intractable problems faced by debtors could be achieved, and if so, on what terms.”

41. The High Court describes as “impermissible” an arrangement where the repayments are reduced by extending the term beyond the likely lifespan of the debtor such that the PPR lender would be likely to recover its debt in full on the demise of the debtor. That impermissibility is identified in the context of a contested section 115A application.

42. The only difference in the present case is that the interest only payments are to cease on the death of the Debtor. Interest will still accrue after that. The PIA provides for the PPR debt, and interest accrued after death to be paid after the death of the Debtor.

43. In addition, there are further terms of the PIA that will operate after the Debtor’s death. The mortgage will remain secured against the PPR (clause 2.1.2 (H)).

Interest will continue to accrue from the date of death (clause 2.1.2 (E)). It cannot be said that the Debtor is reasonably likely to be able to comply with these terms.

44. The second question is whether the court is satisfied having regard to all relevant matters, there is a reasonable prospect that confirmation of the PIA will enable the Debtor to resolve his indebtedness without recourse to bankruptcy. This is required by section 115A(9)(b)(i).

45. Obviously, the PIA by requiring the Debtor to make interest only payments for the rest of his life gives the Debtor a reasonable chance of avoiding bankruptcy.

However, an arrangement that does not pay any of the principal debt during the lifetime of the Debtor does not resolve his indebtedness. His indebtedness will be as unresolved on the date of his death as it is today.

Conclusion

46. The terms of the PIA provide for the principal debt to be paid by the Debtor’s estate after his death. This will involve the security remaining in place and interest continuing to accrue while the estate is administered and the property is sold.

Having regard to the decision of the High Court in Re Fennell, I am not satisfied that having regard to all relevant matters, the debtor is reasonably likely to comply with the terms of the PIA.

47. Furthermore, I am not satisfied having regard to all relevant matters, including the terms of the PIA, there is a reasonable prospect that confirmation of the PIA will enable the Debtor to resolve his indebtedness. The Debtor’s indebtedness will be the same on the date of his death as it will be at the end of the arrangement as it is today.

48. I refuse the order sought pursuant to section 115A(9) of the Personal Insolvency Acts 2012 to 2021.

Gerard Meehan

23 February 2026