Court dismisses PIA approval due to Debtor's failure to prove insolvency regarding pension assets.

THE CIRCUIT COURT AN CHÚIRT CHUARDA

DUBLIN CIRCUIT COUNTY OF DUBLIN

Record No. 2024/001142 Neutral Citation: [2026] IECC 5 IN THE MATTER OF PART 3 CHAPTER 4 OF THE PERSONAL INSOLVENCY ACTS, 2012 - 2021

AND IN THE MATTER OF BERNADETTE O’SHEA OF 42 BROOKVALE DOWNS, RATHFARNHAM, DUBLIN 14, D14DV20 (“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 6 July 2026

1. By Notice of Motion returnable on 10 February 2025 (“the Application”), the Personal Insolvency 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 23 January 2025, Pepper Finance Corporation (Ireland) Designated Activity Company (“Pepper”) contested the Application.

2. The Debtor’s spouse, John Kinsella (“the Interlocking Debtor”) is the subject of an interlocking application (C:IS:DUBL:2024:001141) (“the Interlocking Application”).

Apart from a debt of €43,034.25 (described in paragraph 7 below) owed by the Debtor alone, the Application is identical to the Interlocking Application.

3. The Application and the Interlocking Application were the subject of a hearing on 13 May 2026.

The Personal Insolvency Arrangement

4. A creditors’ meeting considered the PIA on 8 January 2025. Revenue Commissioners voted in favour of the PIA. Pepper voted against it.

5. The PIA contains a summary at Part I. The Debtor is 66. Her most significant asset is the Principal Private Residence (“the PPR”) at 42 Brookvale Downs, Rathfarnham, Dublin 14, D14 DV20. The Debtor and the Interlocking Debtor each own 50% of the PPR. The current market value of the PPR is €575,000. The mortgage balance is €154,306.08. There is therefore €420,693.92 equity in the PPR.

Pepper is the PPR creditor.

6. Part I sets out: the household joint monthly income is €2,845.62; set costs are €2,049.54 per month; rent/mortgage payments are €323.27 per month; motor vehicle and home insurance is €81.58 per month; and additional expenditure is €367.66 per month. According to Part I, this leaves a contribution available of €23.57 per month.

7. According to Part I, the Debtor owes €43,034.33 to Revenue. €30,708.83 is identified as a preferential debt to Revenue. Part IV (para. 5.4) identifies €18,000 as the preferential debt to Revenue. At Part IV, “projected repayments to creditors” are set out in a table. The table indicates that the Debtor will pay a lumpsum of €18,000 to the PIA, which lumpsum will be paid on to Revenue during the first year of the PIA.

8. According to Part I, the Debtor will make; 12 monthly payments of €23.57; 12 monthly payments of €604.93; and a lumpsum payment of €18,000.00. That money is to be used to discharge PIP fees and outlays (€7,067.00) and to pay “dividend to non-preferential in PIA” (1.9c in €) and “Dividend to preferential in PIA” (51.11c in €).

9. My understanding of these different provisions is that the PIA proposes to pay €18,000 to Revenue in full and final settlement of the preferential debt.

10. Parts III and IV of the PIA contain tables indicating that the “Total Income” for the household (i.e. both Debtors) increases from €2,845.62 in Year 1 to €4,047.25 in Year 2.

11. Part IV of the PIA provides that a lump sum of €25,000 from the Debtor’s pension will reduce the mortgage balance to €129,306.08. The term of the mortgage will be extended to 180 months. The interest rate will be 3% fixed for the mortgage term.

Repayments will be fixed at €323.27 for the first year of the PIA. Repayments will be fixed at €943 thereafter.

The Evidence and the Hearing

12. The Prescribed Financial Statement (the “PFS”) verified by the Debtor on 2 August 2024 identifies Ark Life Executive Pension Plans valued at €158,915.96 and €4,119.89 and an Irish Life Retirement Programme valued at €4,607.14. The total values of these pensions is €167,642.99.

13. According to the PFS, monthly payments of €1,500 were due to Pepper. Payments of €828.11 were being made. The interest rate was 9.05%.

14. At the hearing, Counsel for Pepper (Mr Brady) asserted that the Debtor is not insolvent. Pepper submitted that the Debtor could sell the property, discharge her indebtedness, and rehouse herself with the surplus.

15. Caroline Loftus of Pepper swore an Affidavit in Support of Objection on 23 April 2025. Ms Loftus avers: “The viability of the PIA is dependent on the Debtor contributing pension lump sums of €18,000.00 and €25,000.00. However, no evidence whatsoever in relation to the Debtor’s pension is before the Court.”

16. Ms Loftus referred to the lumpsums and concluded that the Debtor has the means to discharge the arrears and chose not to do so.

17. The PIP swore a Replying Affidavit on 4 July 2025. He purported to explain: “the Debtors have private pension amounts which are expected to supplement the income to ensure repayments are met.” The PIP exhibited plan summaries for the Ark Life pensions. This confirms the total value of the plans is €167,642,99. It does not set out what amounts are accessible and when.

18. In relation to the PPR, the PIP averred that neither downsizing nor renting are possible for the Debtors. He stated that the Debtors’ adult daughter has mental health difficulties and that they maintain a room for her. He also averred that the equity in the property is less than the median house price in Dublin.

19. The PIP argued that: “mortgage repayments had escalated with an interest rate applied by the Objector of 9.2%. Clearing the arrears…would not have returned the Debtors to any form of long-term solvent position”.

20. Michael McMahon of Pepper swore a Supplemental Affidavit in Support of Objection on 16 September 2025. He stated there is no evidence that the PPR is anything other than readily realisable. He averred that suitable alternative accommodation is available within the Debtors’ affordability.

21. Mr McMahon reiterated the Pepper request for details of the Debtor’s pension benefits:

“Regarding [the Debtor’s] pension, it is not clear whether [the Debtor] has retired and the pension money is resting in PRSAs (Personal retirement savings accounts). If that is the case, then the entire sum of €167,642,99 is accessible (albeit subject to tax). I say this must be clarified by [the Debtor]. If the entire sum is accessible then the Debtors clearly have the means to discharge the arrears and meet mortgage repayments for the foreseeable future…”

22. The Interlocking Debtor swore an Affidavit on 21 November 2025. He asserted that retention of the family home is necessary because of his daughter’s mental health issues, his own diagnosis of bowel cancer and osteoarthritis and the Debtor’s osteoporosis.

23. The Interlocking Debtor did not provide any further information in relation to the Debtor’s pension:

“…[the Debtor’s] pension is accessible to the extent permitted by the policy has been declared in her Prescribed Financial Statement and the PIA. [The Debtor’s] pension funds will also be used to address the preferential Revenue debt…”

24. Shane O’Connell of Pepper swore a Second Supplemental Affidavit in Support of Objection on 13 January 2026. He averred that there is no objective evidence of the Debtor’s pension entitlements before the Court. He argued that there is no way for the Court or Pepper to know the nature of the pension, whether it is currently accessible or whether it was previously accessible.

25. Ms Loftus averred that the PIA is not sustainable. While the PIA identifies the household affordability as €346.84 per month, the proposed repayments from month

25 onwards are €943.54. She stated it is not clear why the Debtor’s household income will increase by c.€1200 in Year 2. The PIA proposes extending the mortgage term until the Debtor is 80. Ms Loftus asserted that there is no evidence of sufficient income post-retirement to comply with the terms of the PIA.

26. The PIP averred that from 26 September 2025, the Debtor; and from 5 October 2027, the Interlocking Debtor; will receive the non-contributory state pension of

€1,200 each per month. He swore that the Interlocking Debtor will be employed beyond normal retirement age.

27. Mr McMahon claimed to have calculated that from 5 October 2027 the Debtors’ household income will be €5,226.76, leaving affordability of €2,727.98. He averred that the PIA mortgage payments of €943.54 fail to enable Pepper to recover its debt to the extent the means of the Debtor reasonably permit.

28. The Interlocking Debtor stated that he may work reduced hours as he gets older and that the surplus calculated by Mr McMahon is unlikely to ever be so high but will enable the Debtors to maintain repayments for the duration of the restructured term.

That is reasonable. But he does not set out what the actual household income will be or is likely to be.

29. Finally, Ms Loftus argued that the PIA is unfairly prejudicial to Pepper. She claimed that in a bankruptcy scenario, Pepper would receive an immediate 100% return of its capital. She asserted that the PIA will inevitably fail and Pepper “will find itself in the same position it is in today”. She further claimed that the mortgage restructure comprises “a serious abrogation of [Pepper’s] property and contractual entitlements”.

30. The PIP responded that the loan is a purchased loan and he sought to put Pepper on full proof of the claim that the PIA is unfairly prejudicial. He argued that Pepper should adduce actual and express evidence of unfair prejudice. He also argued that Pepper would not “fare better in bankruptcy”.

Insolvency

31. Section 91(1)(d) stipulates that, for a debtor to be eligible to make a proposal for an arrangement, he or she must be "insolvent". S. 2(1) defines "insolvent" in the following terms:-

"insolvent", in relation to a debtor, shall be construed as meaning that the debtor is unable to pay his or her debts as they fall due”.

32. Mr Farry for the PIP submitted that Pepper engaged in the process and is estopped from raising jurisdiction issues, specifically the Debtor’s insolvency or otherwise. I do not accept that submission. Section 91(1)(d) identifies a precondition for a debtor to be eligible to make a proposal for an arrangement. If a debtor fails to satisfy that precondition, that debtor is ineligible. The conduct of any other party is not relevant.

33. Pepper relied on the decision of the High Court (McDonald J.) in Re Nuzam [2020] IEHC 164. The Court considered the definition of "insolvent" in s. 2(1). After a review of the case law relating to both the Acts and the Companies Acts, the Court identified six "Applicable principles in relation to insolvency":

51.It seems to me that a number of general principles can be extracted from the case law discussed above: -

(a) In the first place, it is important to bear in mind that, as explained by Lord Walker, balance sheet insolvency was developed in a company law context in circumstances where the court, in determining whether a company is unable to pay its debts, has been required since 1907 to have regard to the prospective and contingent liabilities of the company;

(b) In circumstances where there is no such requirement contained in the definition of “insolvent” in s. 2 (1) of the 2012 Act, it seems to me to follow that the balance sheet test is not applicable for the purposes of determining whether a debtor is insolvent for the purposes of the 2012-2015 Acts. This

conclusion is also consistent with the view taken by Baker J. in Sweeney (a debtor).

(c) However, as Laffoy J. made clear in Connemara Mining, in applying the “cash flow” test (i.e. determining whether a debtor or a company is unable to pay debts as they fall due) the court will have regard to the readily realisable assets held by the debtor or company concerned. As Laffoy J. stressed in Connemara Mining, this is a matter of common sense.

(d) Thus, the mere fact that a debtor may not have cash available to pay his or her debts at a particular point in time is not determinative. It will be necessary to consider whether there are other realisable assets of the debtor that could readily be realised with a view to discharging the debts in question. For example, if the debtor held An Post savings certificates or prize bonds, or readily realisable shares, those are assets which would very obviously be taken into account in determining whether a debtor is unable to pay debts as they fall due. The fact that it may take a number of days or even a few weeks to obtain payment on foot of such instruments, would not matter;

(e) It is unlikely that a family home would ordinarily fall within the same category. This is for the very simple reason that a family home cannot usually be sold so readily. In particular, it cannot usually be sold until the owners have found alternative accommodation. Experience tells us that this process can take a number of months and it is therefore difficult to see how, in most cases, a family home could fall within the category of readily realisable assets;

(f) On the other hand, there may well be cases where, having regard to the extent of the positive equity held in a family home, it would be absurd to consider the owner to be insolvent for the purposes of the 2012 Act. To take a hypothetical example, if a family home is worth €1 million and the only debts of the owner amount to €40,000, it is unlikely that it would be appropriate to invoke the application of the 2012 Act. In this context, I do not accept the submission made by counsel for the practitioner that, by reason of its status under the Acts, the family home (or “principal private residence” to use the language of S. 115A (18) (a)) must always be excluded from a determination as to whether a debtor is or is not unable to pay his or her debts as they fall due. While the 2012-2015 Acts undoubtedly demonstrate that the Oireachtas was concerned to ensure, in so far as feasible, the continued occupation by a debtor of his or her home, that is only in circumstances where the debtor falls within the ambit of the 2012-2015 Acts in the first place. In order to trigger the protections afforded by the Acts, it must first be demonstrated that the debtor is, in fact, insolvent within the meaning of s. 2 (1). It is only after that hurdle has been surmounted that the considerations identified by counsel for the practitioner can be said to arise.

34. Pepper also relied on the Supreme Court (Baker J.) decision in Re O'Connor [2023] IESC 31. In that case, the Court considered the question of whether a PPR might be “readily realisable”.

115. Whether a principal private residence is readily realisable will always be a matter of fact and will depend on factors such as the market for the property in question and the length of time that it is likely to take to sell. The existence of impediments to sale, such as a lis pendens, the refusal of a spouse or civil partner to consent to sale under the Family Home Protection Act 1976, may make a sale difficult or slow the process. More fundamentally the vendor will require possession to sell, and where the creditor is a mortgagee, and unless the debtor consents to deliver up possession, a mortgagee of a principal private residence will require a court order for both possession and sale pursuant to the provisions of Part 3 of the Land Conveyancing and Reform Act 2009 as amended. The mortgagee may, depending on the manner of sale, also need to comply with the requirements of the Central Bank Code of Conduct on Mortgage Arrears. These protections created by other legislation could mean long delays in realising the value of the asset, so that the asset could not be said to be readily realisable.

Discussion

35. The Debtor is balance sheet solvent, i.e. the value of her assets is greater than the value of her liabilities. The parties differ however on whether the Debtor is insolvent within the meaning of the Acts. Per the High Court in Re Nuzam, the Debtor must prove that she is cash flow insolvent.

36. According to the PFS, monthly payments of €1500 are due to Pepper. The Debtor’s net disposable income available for debt service is €91.43. The Interlocking Debtor’s PFS sets out net disposable income available for debt service of €255.11. The total net disposable income available for debt service is €346.54. This figure is repeated in Part I of the PIA. Those figures indicate that the Debtor has insufficient income to pay her debts as they fall due.

37. The PFS stated that monthly payments of €828.11 were being made. The Interlocking Debtor averred that the Debtors have recently increased monthly payments to circa. €900 per month. The PIA proposes repayments from month 25 onwards of €943.54.

38. The argument in relation to the solvency or insolvency of the Debtor focuses firstly on the €420,693.92 equity in the PPR and secondly on the Debtor’s pension assets of €167,642.99. If the PPR and/or the Debtor’s pensions are readily realisable assets then the Debtor is able to pay her debts as they fall due and is not cash flow solvent.

39. Mr Brady for Pepper submitted that the level of equity in the PPR is inconsistent with a conclusion that the Debtor is insolvent. Pepper further submitted that the Debtor should sell the property, pay the creditors and use the surplus to rent or buy alternative accommodation.

40. The PIP and the Interlocking Debtor have both averred that downsizing or relocating is not an appropriate option for these Debtors. This evidence relates to the Debtors’ own health difficulties and their daughter’s mental health issues.

41. The affidavits sworn on behalf of Pepper do not assist on the question of whether the PPR is a readily realisable asset. Ms Loftus, Mr McMahon and Mr O’Connell all aver that they are employed as “Senior Operations Managers” by Pepper. They do not claim to have any qualifications or experience relating to the marketing and sale of houses. They do not claim to have specialist knowledge of the property market.

They do not provide evidence of other houses in the area that have been marketed and sold in any timeframe.

42. The PPR is a family home, such as the High Court described in Re Nuzam, that cannot usually be sold until the owners have found alternative accommodation.

Experience tells us that this process can take a number of months and it is therefore difficult to see how, in this case, the PPR could fall within the category of readily realisable assets.

43. However, the Debtor has pensions. The PFS and the affidavits have valued these pensions at €167,642.99. The Debtor proposes to make lumpsum payments of

€18,000 and €25,000 during the first year of the PIA. That is enough to cover the pre-PIA payments due to Pepper for more than two years. Depending on the accessibility of the pension funds there may also be money available to discharge the Revenue debt.

44. The Debtor bears the onus of proving she is insolvent. Pepper raised the issue in its notice of objection dated 23 January 2023: “The Debtor is not insolvent. The Debtor’s assets vastly exceed his liabilities. The Debtor can afford to discharge his obligations as they fall due”.

45. Pepper has asked repeatedly for information in respect of the Debtor’s pensions.

The Notice of Objection, Ms Loftus’s Affidavit, Mr McMahon’s Affidavit and Mr O’Connell’s Affidavit all sought details of the pension benefits payable. The details were never provided. Specifically, the Debtor never set out what benefits are payable and when such benefits are payable.

46. To discharge the onus of proof, the Debtor must set out her financial circumstances at the date of the hearing. The Affidavits sworn on behalf of the Debtor have failed to detail the pension benefits payable and/or the dates they become payable. She has not proved that the pensions are not readily realisable assets. Accordingly, given the cash potentially available from the Debtor’s pensions, the amount of the monthly shortfall in affordability at the date of the protective certificate, the level of arrears on that date and the amount of the Revenue debt, I am not satisfied that the Debtor is insolvent.

Conclusion

47. As the Debtor is not insolvent as required by section 91(1)(d) of the Acts, she is not eligible to make a proposal for a Personal Insolvency Arrangement.

48. Pepper also objected to the PIA on the further grounds that: it is unsustainable; it is unfairly prejudicial to the interests of Pepper; and it does not enable Pepper to recover the debt due to it to the extent that the means of the debtor reasonably permit. Given my conclusion that the Debtor is not insolvent it is unnecessary to consider those further grounds.

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

Gerard Meehan

6 July 2026