The Insolvency Service (ISI), the body set up to administer the Personal Insolvency Legislation, finally published guidelines as to what constitutes a reasonable standard of living and reasonable living expenses. This will be used to calculate the insolvent’s disposable income available to meet its debts to avail of the insolvency processes.
On the 18 April 2013, the Insolvency Service revealed that ‘’a reasonable standard of living is one which meets a person’s physical, psychological and social needs’. Under the ISI model, a ‘reasonable standard of living’ does not mean that a person should live at a luxury level but neither does it mean that a person should only live at subsistence level. A debtor should be able to participate in the life of the community, as other citizens do. It should be possible for the debtor ‘to eat nutritious food to have clothes for different weather and situations, to keep the home clean and tidy, to have furniture and equipment at home for rest and recreation, to be able to devote some time to leisure activities, and to read books, newspapers and watch television’.’
The ISI model is predicated on need, not wants. It excludes private medical insurance and holiday costs. A car is not deemed necessary where there is good public transport. The guidelines set out 15 main categories of reasonable living or household expenses.
For a single adult, with a car, Monthly expenditure* is approximately €1,000 per month, based on the household’s ‘allowable’ expenditures of;
1) Food; €250
2) Clothing; €35
3) Personal Care; €33
4) Health; €31
5) Household Goods: €31
6) Household Services; €48
7) Communications; €43
8) Education; €25
9) Transport; public €136, or if car is necessary, €240
10) Household Energy; €50 for electricity and €55 for heating;
11) Insurance; Home €12 and car €26
12) Savings and Contingencies; €40
13) Social Inclusion and Participation; €125
14) Housing; will be variable depending on mortgage and rental; and
15) Childcare will depend on employment status of adults and age of child.
* (Some figures are rounded off)
For a DRN, there is a strict application of the reasonable living expenses model in determining the eligibility of the applicant. Where a DSA or a PIA is proposed, the decision on reasonableness or otherwise of living expenses will be a matter for the creditors to determine on a case by case basis with PIP acting to facilitate debtors and creditors in working out an arrangement acceptable to both, which may involve relocation. Reasonable living standards may be higher than the guides where acceptable to creditors. Apart from flexibility in this, the banks’ attitude towards debt forgiveness will have to change for the new regime to work, as debt resolution targets must be attainable for borrowers so that they are motivated, and not crushed