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
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