Category Archives: Living Expenses

Insolvency Service Guidelines For Reasonable Living Expenses

When working out the monthly amount of debt repayments that someone can afford  – there will be  guidelines on how to calculate disposable income after housing costs and expenses needed to maintain a reasonable standard of living .

The Insolvency Service of Ireland say that having these guidelines will “help safeguard a minimum standard of living so as to protect debtors while facilitating creditors in recovering all, or at least a portion, of the debts due to them.”

The ISI guidelines for a single adult allow for a monthly expenditure of  €900.08 (where no car is needed ) Or  €1029.83  if they need a car (eg in rural areas)
This does not include housing costs (Rent or Mortgage) . There is also allowance in the guidelines for a debtor to specify other reasonable costs which arise as a consequence of ill-health or disability.

These guidelines are saying that after tax,prsi etc – this is the amount a person should be left with to live on. If they can’t make debt repayments from the remaining income – then they are insolvent.

These are the breakdowns of the guideline expenses€1029.83 for a single Adult  – Monthly

Food  € 247.04
Clothing  € 35.73
Personal Care  € 33.40
Health € 31.09
Household Goods € 31.47
Household Services € 28.61
Communications €43.45
Social Inclusion & Participation € 125.97
Education € 24.50
Transport (Private) € 240.13
Household Electricity € 48.87
Home Heating € 57.31
Personal Costs € 0.79
Home Insurance € 12.22
Car Insurance € 25.91
Savings & Contingencies € 43.33

The figure for a 2 adult household with no children  and needing a car – is  €1431.58 a month
So the guidelines only only allow an extra €401.75 a month for a couple compared to a single person .

There are additional expenditure amounts for children – they are different depending on the age of the child . The figures range from € 372.49 a month for an infant , € 163.67 a month for pre-school , € 294.71 for primary school age and €497.32 a month for a child of secondary school age .

These guidelines will be used when applying for a Debt Settlement Arrangement  or a Personal Insolvency Arrangement. The legislation states that   the DSA or PIA   “shall not contain any terms which would require the debtor to make payments of such an amount that the debtor would not have sufficient income to maintain a reasonable standard of living for himself or herself and his or her dependants. ”   .
The Personal Insolvency Bill also states that   ” in determining whether a debtor would have a sufficient income to maintain a reasonable standard of living for the debtor and his or her dependants, regard shall be had to these guidelines.”

For a Debt Relief Notice – to be eligible –  the debtor must have net disposable income, , of €60 or less a month. Disposable income is  income after tax/prsi/usc and deductions for reasonable living expenses and payments to cover debts that are excluded from this process)

For example – Take Home Pay €1500 a month
Single person’s reasonable  living expenses = 1029.83
Rent = €450 a month
Disposable Income =  1500 – 1029.83 – 450  =  20.87 a month
This is less than €60 – so they could apply for a Debt Relief Notice and possibly get up to €20k of debts written off

Insolvency Service of Ireland Website

The Insolvency Service of Ireland is planning to fully launch it’s website in April. The ISI  full publicity campaign launch was  scheduled for the week of  8th of April 2013. That has now been delayed until “mid April”

During April ISI plan to publish  guides to the three new arrangements: Debt Relief Notices (DRN), Debt Settlement Arrangements (DSA) and Personal Insolvency Arrangements (PIA).

The  Insolvency Service of Ireland website will contain various scenarios as to how the new arrangements may work in practice.

The ISI will also publish  Guidelines on Reasonable Standard of Living and Reasonable Living Expenses for debtors.

During that week they will also publish  information about the Regulations for the authorisation and licensing of Personal Insolvency Practitioners (PIP).

The website will be  www.isi.gov.ie

Reasonable Living Expenses

One of the features of the new Insolvency Legislation is that in order to be  eligible for a Debt Relief Notice   a person’s  net monthly disposable income is €60 or less.  The disposable income is income after deductions for reasonable living expenses .

The Insolvency Service of Ireland will be publishing guidelines  very soon about reasonable living expenses to be used here in Ireland

In England  – where similar insolvency legislation has been in place for a few years –  these are the guidelines they use for deciding what kind of expenditure is classed as being ‘reasonable day-to-day living expenses’?

Normal monthly expenses, would include rent or mortgage payments (which are reasonable for the area you live in and the size of your family), food, heating and lighting, etc.
Below are some examples of things that can also be treated as reasonable expenses in England

TV licence, TV and video hire

Household insurance

Car tax and insurance (if the trustee decides your car is ‘exempt property’ and allows you to keep it)

AA/RAC or similar membership (if you still have your car)

Membership of a professional body, needed for your job (unless your employer pays for this)

Prescriptions/dental treatment/opticians

Payment under a maintenance order or Child Support Agency assessment

Mobile phone (a reasonable monthly cost)

Dry cleaning

Other expenditure items that could be considered:

Clothing

Holidays

Hairdressers

Extra curricular activities for children

After school clubs

Pets

Rent arrears

This is not meant to be a complete list, and other expenses could be considered.

 

What kind of expenditure would not be classed as ‘reasonable day-to-day living expenses’ in England ?

The following are examples of expenses which are likely to be disallowed (unless there are special circumstances):

Gym membership, any sports expenses or club membership

Additional pension contributions to enhance a pension

Private healthcare insurance

Money for gambling, alcohol or cigarettes

Satellite TV

Excessive mortgage payments

Regular payments to charitable and religious organizations/tithing

Again, the list is not meant to be complete.