A “vulture fund” objected to a financial rescue plan for a heavily indebted Co Offaly firefighter, arguing that he could pay more off his mortgage from his family’s child benefits.
The High Court overruled the objections of Promontoria, owned by US private equity giant Cerberus, on Monday, approving a €75,000 write-down on the debts of Gregory Donagher of Portarlington to match the €90,000 market value of his home.
The decision gives the 46-year-old a fresh financial start and means he avoids bankruptcy.
The ruling is the latest in a growing number of personal insolvency cases being signed off by the courts to resolve long-standing personal debt cases under legislation passed after the financial crash.
In October 2018 Promontoria challenged an assertion by the firefighter’s financial adviser that the family’s €420 in monthly benefits for three children, aged 16, 13 and eight, should not be counted for income in making a claim for his overall debts of €174,000 to be written down.
The fund's solicitor Peter Kelly claimed the Insolvency Service of Ireland's (ISI) guidelines "explicitly incorporate the costs associated with each dependent child in the calculation of set costs".
“If the debtors are in receipt of child benefit in respect of their children, then that income should logically be applied towards the reasonable living expenses, thereby facilitating greater mortgage repayments to be made,” he argued in a sworn statement.
But in court on Monday, the fund’s counsel conceded child benefit payments should not in fact be considered in calculating what debtors can afford to pay under ISI guidelines.
Mr Justice Denis McDonald overruled an earlier decision by the Circuit Court in Tullamore blocking the proposal, known as a personal insolvency arrangement.
The plan was devised by personal insolvency practitioner Ronan Duffy of Derry firm McCambridge Duffy and argued for in court by Mr Donagher's counsel Keith Farry BL. The fund will now have to bear a loss of €70,000 on the mortgage.
Mr Donagher fell into financial difficulties when he was out of work due to illness and the arrears on his mortgage “spiralled out of control”, the court heard.He receives income of €3,390 a month as a “retained” or part-time firefighter.
Subprime lender Stepstone, the original owner of the mortgage, initially blocked the write-down proposal, known as a personal insolvency arrangement. The case was taken over by Promontoria after it acquired the man’s mortgage in March 2018 when it bought Stepstone for almost €100 million.
