Reasonable Living Expenses Guidelines launched

Brendan Burgess

Brendan Burgess

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How are Reasonable Living Expenses calculated?

The ISI is required by section 23 of the Personal Insolvency Act 2012 to prepare and issue guidelines as to what constitutes a reasonable standard of living and reasonable living expenses.
In the guidelines, the costs attributed to a household are termed ‘set costs’. To these are added the reasonable costs of housing, childcare and special circumstances where these arise. This produces the total for reasonable living expenses for a given household.

Reasonable Living Expenses

Total Set Costs
Childcare
Housing
Special circumstances


Set costs can be found by looking up the tables contained in Schedule 1 of the guidelines and choosing the table which best fits the situation of the applicant based on household composition and on the need of the household for a car. The set costs of a household are compiled by totalling the costs for each individual in the household.

A significant expense connected with employment arises where childcare is needed, particularly at the first two stages of childhood i.e. infancy and pre-school. Where childcare costs are paid they are added to the total for set costs. The AI or PIP should assess the reasonableness of these expenses taking into account the factors outlined in the guidelines on pages 11-12.


Housing can also be a significant expense. In considering what constitutes a reasonable and sustainable accommodation expenditure in an individual case, the AI or PIP should assess the rent or mortgage payments taking into account the factors outlined in the guidelines on pages 11-12.


The differing needs of persons, having regard to matters such as their age, health and whether they have a physical, sensory, mental health or intellectual disability can be accommodated by a debtor specifying reasonable costs which arise as a consequence of ill-health, age or disability under this category of special circumstances. This category may also be used where a debtor has persons other than his or her minor children financially dependent on him or her, such as where the debtor is contributing financially to the care of an adult dependent such as, for example, an elderly relative or a college-going child.


Detailed schedules [broken link removed]
 
The key document to read are the possible scenarios here [broken link removed]

What strikes me most from their publications is that the most focus is on non mortgage holders ie single or married renting. The one I did study was no 5, PATRICK AND LISA’s. Firstly I'm surprised that they feel that people may have that much unsecured debt. In any event in the heel of the hunt they come out with a mortgage repayment of 1600 at the end which IMO will probably prove to be unsustainable at that point and they will default on the loan and lose the house.
 
As a general principle, the ISI wishes to see debtors retaining the autonomy to make their own choices as to what is best for them, though necessarily within the constraints of reasonableness and the overall expenditure limits. Thus, while the focus groups have decided that cable or satellite television subscriptions are not necessary and that allowance for a SAORVIEW approved set-top-box or television is sufficient, a debtor may choose to retain such a subscription by prioritising it within his or her budget.

So long as an applicant for one of the three new personal insolvency processes under the Act comes within the overall headline figure for reasonable living expenses, the ISI will not be prescriptive in terms of what the applicant can or cannot spend their money on.

Only where an applicant spends in excess of what is considered to be reasonable under these guidelines will it become necessary for the AI or PIP to look at his or her spending across the categories of expenditure.
 
Illustration 2: Household – Two-parents, four children aged 3, 5, 10 and

14 years old, and no private car needed

[FONT=&quot]Th[/FONT][FONT=&quot]e relevant table is table 5 on page 41. To the set costs for the couple, circled in blue, are added the appropriate child costs, circled in orange. In this case the Pre-School, Primary School (twice for the two primary age children) and Secondary School age groups are selected

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[FONT=&quot] [/FONT]As the household has four children an adjustment is made to reflect the additional costs associated with a third and fourth child. In this example both are included, circled in green.

Working through this example, the AI or PIP will add the figure of €1,305.77 in respect of the two adults, €46.09 in respect of the Pre-School child, €354.26 in respect of the two Primary School children (€177.13 multiplied by two) and €379.74 in respect of the Secondary School child. An adjustment is then made to reflect the additional costs associated with having more than two children – in this example it is €9.10 (€9.83 plus -€0.73). The total set costs are €2,094.96.
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Schedule 1: Index of tables


Table 1. One adult household, no vehicle

Table 2. One adult household, vehicle

Table 3. One adult household, one or more children, no vehicle

Table 4. One adult household, one or more children, vehicle

Table 5. Two adult household, one or more children, no vehicle

Table 6. Two adult household, one or more children, vehicle

Table 7. Two adult household, no vehicle

Table 8. Two adult household, vehicle
 
davidoco said:
The key document to read are the possible scenarios here [broken link removed]

What strikes me most from their publications is that the most focus is on non mortgage holders ie single or married renting. The one I did study was no 5, PATRICK AND LISA’s. Firstly I'm surprised that they feel that people may have that much unsecured debt. In any event in the heel of the hunt they come out with a mortgage repayment of 1600 at the end which IMO will probably prove to be unsustainable at that point and they will default on the loan and lose the house.
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You would think that at least one of the many people who must have looked at that document before publication would have thought - "hey we should really have a list of the acronyms and describe what they actually mean at the very front of the document", if they did they weren't listened to. Very poor.
 
dereko some would say the acronom 'AI' they use isn't 'Approved Intermediary' but 'Artificial Intelligence'. The intelligence that helped get many into the mess in the first place.

In addition to the agreed fee structure charged I wonder if an AI or PIP can also benefit financially from restructuring loans and other financial products?
 
Sumatra said:
dereko some would say the acronom 'AI' they use isn't 'Approved Intermediary' but 'Artificial Intelligence'. The intelligence that helped get many into the mess in the first place.

In addition to the agreed fee structure charged I wonder if an AI or PIP can also benefit financially from restructuring loans and other financial products?
Click to expand...


Will the AIs not all be MABS staff? if so how would they benefit?
 
No I don't think they have to be MABs staff Claire. AI or PIP can be solicitors, barristers, accountants, qualified financial advisors or holds a qualification in law, business, finance.
 
Sumatra said:
No I don't think they have to be MABs staff Claire. AI or PIP can be solicitors, barristers, accountants, qualified financial advisors or holds a qualification in law, business, finance.
Click to expand...

My understanding is that PIPs can be solicitors, accountants etc but that only MABS staff can act as AIs. That you can only get a DRN through MABS.
 
Brendan Burgess said:
Schedule 1: Index of tables


Table 1. One adult household, no vehicle

Table 2. One adult household, vehicle

Table 3. One adult household, one or more children, no vehicle

Table 4. One adult household, one or more children, vehicle

Table 5. Two adult household, one or more children, no vehicle

Table 6. Two adult household, one or more children, vehicle

Table 7. Two adult household, no vehicle

Table 8. Two adult household, vehicle
Click to expand...

There seems to be a gap in the guidelines with regard to the set expenses to be allowed where there is a third-level student in a family. All examples are based on either one or two adults, with or without children. The tables then only show what amount to allow, under set expenses, for children at various stages of schooling, up as far as secondary.

For instance, how should a family of 2 adults, with one secondary school age child, and one third-level student child (adult really) calculate their "allowed" set expenses.
Has anyone found this anywhere?

I must say, the presentation of the guidelines seems unnecessarily difficult to wade through, although maybe its just the newness of it.
 
From looking at the Insolvency Service website I'm wondering who will become personal insolvency practioners, there was a thread on who these pips might be but it seems to be closed off, at least I cannot post a reply to it.

I was interested myself and meet the standards as set out but when I see an initial fee of €1500 to register as a pip and an annual fee thereafter of €1000, the need for professional indemnity insurance cover, ( generally or per client, not sure ), good office space ( covered in admin ), sundry additional requirements/costs and there are further costs at least for me in undertaking a professional course followed by an examination etc..so the start up costs required to focus entirely on this area are about €5k or thereabouts.

I heard the Director speak on the RTE Six One news of perhaps a €5 in any spare €100 which would be available to a creditor as a charge to the PIP I thought, nope not for me, the costs and admin. would be horrendous and no guarantee of any referrals or opportunity to get paid for doing what I believe will be one tough job.

I am already working with distressed borrowers and know how hard it is for people and so generally only work the larger cases where I will get paid for my time and efforts but seriously unless I am missing something who would want to be a PIP, I reckon it would be less than minimum wage and a cost and administrative burden for whoever takes it on unless they have a complimentary business already staffed with spare capacity and a lot of it at that.
 
"Under the guidelines a single adult with no car will be permitted expenditure of €898.96 in set cost over and above any mortgage or rent payments. The set costs will rise to €1,030 if that adult has a a car. They will be given €126 a month – or €29 a week to cover social inclusion"

Now, am I alone in thinking that €900 after mortgage/rent for a single person is very very generous?
 
sahd you're right, I can't see a solicitor/ barrister working for fees illustrated over a 6 year period in the given examples. It will be interesting to see who other than the MABS 16 will go down the AI route and what quality of service they can provide for such a fee.

Approx €4,000 gross earned over 6 years per case. There will probably be an initial boom in business for the first few years but after that a trickle. Perhaps some may offer it as a 'service' to compliment their existing business but then statutory duty, compliance, insurance, membership etc may make it a hard one to justify.
 
PIP's

Sumatra said:
sahd you're right, I can't see a solicitor/ barrister working for fees illustrated over a 6 year period in the given examples. It will be interesting to see who other than the MABS 16 will go down the AI route and what quality of service they can provide for such a fee.

Approx €4,000 gross earned over 6 years per case. There will probably be an initial boom in business for the first few years but after that a trickle. Perhaps some may offer it as a 'service' to compliment their existing business but then statutory duty, compliance, insurance, membership etc may make it a hard one to justify.
Click to expand...

You could well be right. This will be very labour intensive work for highly qualified staff, and €5 per €100 if that is to be the fees will not be attractive

Steve Thatcher
www.helpwithdebtuk.com
 
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