Important Decision Helps Mortgage Holders Cancel Debt

Insolvent homeowners will be more likely to be able to get unaffordable mortgage debts written off following a major High Court judgment.

The decision came after a legal battle between KBC Bank Ireland and a Drogheda couple who fell behind on a €285,647 mortgage on their three-bedroom semi-detached house after both lost their jobs for a time.

The court-agreed personal insolvency arrangement means the couple, Colm and Paula Callaghan, who are in their late thirties and have three young children, can write off around €242,000 in debt, including €165,000 owed to KBC . with a €120,000 mortgage from KBC on a house with a current value of €105,000.

“Kick in the Box”

The bank had appealed an earlier Circuit Court decision granting the couple the deal. KBC wanted the mortgage to be amortized only up to €270,000.

This amount would then have been split in two, with the Callaghans continuing to make repayments on €135,000 of debt. The remaining €135,000 would have been declared “inactive” and not subject to payment of interest at the present time. It could be repaid later in the couple’s life, or from the sale of the house after their death.

Siding with the Circuit Court’s earlier ruling, Judge Marie Baker dismissed the bank’s objection, arguing that KBC’s proposal was “pushing the box down the road”.

More than 54,000 mortgages totaling 10.9 billion euros in outstanding debt were more than 90 days past due at the end of last year, according to the Central Bank.


Ms Justice Baker’s decision should strengthen a client’s position in negotiations with banks who want to ‘freeze’ part of a mortgage for several years. This has been a preferred option for many lenders.

Instead, customers will be in a better position to push for a full and final settlement, including the possible cancellation of a much larger sum of debt, within a shorter period of time – an outcome which could see Irish banks having to suffer significant losses. faster.

“It is extremely important. As a result of this, banks will have to revisit ‘warehousing’ as the option of choice,’ said Ronan Duffy, partner at Donegal firm McCambridge Duffy, which designed the couple’s personal insolvency arrangement.

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