Farmers with unsustainable debts have been urged to consider entering a personal insolvency arrangement (PIA) as a means of preventing a forced land sale.
Irish Creamery Milk Suppliers Association’s (ICMSA) Shane O’Loughlin claimed that the court-approved PIA mechanism had been hugely successful in preventing fire sales of farmland by vulture funds over the last two years.
PIA arrangements offered “practical solutions” for farmers, which enabled them to stay in their homes and work their farms, said the ICMSA farm business chair.
By restructuring the debts, the PIA seeks to set repayments at a realistic and achievable level for the farm business, O’Loughlin explained.
The package is generally put together by a personal insolvency practitioner, who applies to the courts on behalf of the farmer to seek the protection of a PIA.
O’Loughlin stressed that PIAs did not allow farmers to simply walk away from their debts, but it was a process which facilitated repayment of outstanding loans over the longer period and at a sustainable level.
“For example, a dairy-farming family with four young children had their debts restructured under a PIA,” he said.
“The debt secured on the 90ac of farmland and the home house had built up to over €1m, with interest and penalties. Under the PIA approved by the courts, the debt was written down to the market value of the land of circa €750,000.
“This written-down debt was then restructured over a 25-year period under a split loan basis, with half being serviced on a capital plus interest basis and the other half parked on an ‘interest roll-up’ basis,” O’Loughlin explained.
Dublin-based personal insolvency practitioner Gary Digney of PKF-FPM Accountants described the Cork example as “a brilliant outcome for the farmer, his wife and his young children”.
Digney worked on the Cork case with the ICMSA. He said the debt had been “right-sized”, while the farmer was now making payments on a “sustainable, affordable basis”.
“The creditors will also get a far better return than any alternative,” Digney maintained.
“The farmer and his family can now get on with running the farm and living their life without the stress and worry of debt and the land being sold from under them,” he added.
In another case, a 55-year-old Wicklow farmer had his farm placed on the market by a vulture fund with a debt of around €110,000 owing and secured against 70ac.
I would encourage any farmer in debt to seek the advice of an experienced personal insolvency practitioner
The land sale was stopped in the courts and a PIA proposal was put to creditors.
“The loan was restructured over 10 years, with the secured creditor being paid in full, and around €50,000 of unsecured creditors being paid in full from the sale of a site,” Digney said.
“I have been working with the ICMSA for a number of years now and there has been dozens of farms that have been able to use the PIA to retain the farmland and restructure the debt on a sustainable basis.
"I would encourage any farmer in debt to seek the advice of an experienced personal insolvency practitioner to assess their options,” he added.