Living Expenses

Personal Insolvency Service Guidelines

The Insolvency Service is obliged under the Personal Insolvency Act, to prepare guidelines as to what constitutes a reasonable standard of living and reasonable living. It is to have regard to the CPI (consumer price index). Guidelines may be issued periodically and must be issued at intervals of not more than once yearly.

The guidelines are to be taken into account in assessing the eligibility for a debt relief notice in relation to the terms of debt settlement arrangements, personal insolvency arrangements proposals and bankruptcy payment orders.  They are intended to guide participants, intermediaries and the courts as to what constitutes a reasonable standard of living and reasonable living expenses.

For the purpose of Debt Relief Notice, a person will qualify only, if he has a net disposable income of less than €60 per month.  This is calculated with reference to the published guidelines and allowances. Net disposable income is calculated as income, less expenditure.  Expenditure comprises reasonable living expenses, income tax, insurance and payment of excluded debts.

A Debt Settlement Arrangement and Personal Insolvency Arrangement must not contain terms that would require the debtor to make payments of an amount such that he would not have sufficient income to maintain a reasonable standard of life for himself and his dependents. Regardless is to be had to the guidelines.

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Setting the Levels

The legislation requires the Insolvency Service to consult with various parties and take into account certain factors.  They include

• measures and indicators of poverty set out in   Government policy publications,
• official statistics,
• consumer price index
• differences in the size and composition of households,
• differences with regard to age, health, physical and mental needs,
• the need to facilitate the social inclusion of debtors and their family.

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Approach of Guidelines

What are reasonable living expenses will depend on the circumstances of the person concerned.  One person may require a vehicle in a remote area, whereas in an urban area, a vehicle might not be a reasonable requirement.  Provision is made for reasonable housing costs by way of mortgage or rental payments.

The needs of persons will differ in accordance with their age and health.  They may have specific medical, physical or intellectual requirements or disabilities. Dependents may have special needs and requirements.

The guidelines seek to provide a model for a balanced diet, clothing, household services, goods, utilities, transport, necessary insurance and a modest allowance for unexpected circumstances.

The guidelines indicate that there should be some incentive for a person in employment to work.  The reduction should not be as such as to incentivise unemployment.  Accordingly, working debtors entering an arrangement should be able to retain some of the money which they earn, before the balance of their income goes to discharge debts.

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Reasonable Standard of Living Allowed

The PIP determines an acceptable level of reasonable living expenses in the particular circumstances.  The amount should not be less than that indicated by the guidelines.  Creditors may be prepared to agree a higher allowance to the debtor, on the basis of incentivising him/her in adhering to the agreement.

The guidelines do not assume that a person should live at subsistence level. They are premised on the principle that the person should be able to participate in the community, as other citizens.  He should be able to eat nutritious food, have clothes for different weather, have furniture and equipment at home for rest and recreation, and devote some time to leisure activity.

The guidelines may facilitate a debtor in choosing between a limited number of quasi- luxuries, by prioritising them within the terms of his budget.  Once this comes within the overall figure, the guidelines are not prescriptive as to how or on what, money should be spent.  Where an applicant spends in excess of what is reasonable, the AI or PIP, as the case may be, should review his expenditure across other categories.

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Elements of Reasonable Living Expenses

The principal figure for reasonable living expenses is made up of a number of categories as follows; food, clothing, personal care, health, household goods, household services, communications, education, household energy, insurance, saving and contingencies, social inclusion and participation, transport, housing and childcare.

Specified allowances are made for single adults of working age living alone. Amounts are allowed for savings, life insurance and for contingencies.  Household insurance costs are allowed.

Amounts are specified for clothing and footwear, personal care and hygiene, health, household services, communications, education (to include uniforms, books and stationary) and social inclusion.

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Housing

Housing costs are not guided or prescribed in a general way. Because of the variance in circumstances, the actual accommodation costs and needs are assessed.  The AI and PIP are to have regard to the costs likely to be incurred in remaining in an occupation of a principal private residence relative to alternative accommodation. Where the cost of remaining is disproportionately large, he is not required to formulate the proposal on the basis of the debtor continuing to reside in the existing residence.

In considering what constitutes reasonable and satisfactory accommodation, regard is to be had to the costs incurred by the debtor in occupying his current accommodation, the ability of persons residing with him to contribute to those costs and the reasonable living accommodation needs of the debtor and his dependents.

In forming an opinion as to reasonable accommodation needs, consideration is taken of the size and composition of the household.   The AI or PIP may have regard to his own knowledge of existing housing costs and publicly available data.  This includes data in the Property Price Register, PRTB and Central Statistics Office record.

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Children and Dependents

The cost of maintaining dependent children is allowed. Childcare expenses include maintenance as well as fees for child care and pre-school care.Childcare costs are variable and are considered a case by case. Subject to this, guidelines are given on reasonable measures of childcare costs.

The reasonableness of childcare costs is considered.  The Early Childhood Care scheme may provide free childcare. The typical costs of childcare in the area are considered. Proof of childcare costs by way of bank statements will be sought by the AI / PIP.

Child benefit is deducted. Account must be taken of special circumstances, including physical, intellectual and, mental health needs of the person or his dependents.

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Tabulated Amounts for Families / Dependent

There are a number of tables setting out the guidelines on the basis of a number of dependants and members of the household.  Where there are two adults, it is presumed that the expenses are split equally. The contrary may be shown, where this is the case.

Separate tables are provided for

• one adult household;
• no vehicle one adult household,
• one adult household with vehicle,
• one adult household with one or more children and no vehicle,
• one adult household with one or more children with vehicle.

There are variable increments for children, depending on whether the child is an infant or at preschool, primary or secondary level.  The highest allowance is for children at secondary level.  Allowances are at lower levels for infants and preschool.  However, in the case of preschool children, the actual childcare costs are assessed.

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References and Sources

Irish Books

Burke & Comyn Personal Insolvency Law               2014

Bracken Practioner’s Personal Insolvency Handbook 2013

Law Society (Wright)       Insolvency Law                  2009

Sanfey & Holohan            Bankruptcy Law & Practice2nd Ed             2010

Farry, Holohan  Consolidated Bankruptcy & Personal Insolvency Legislation2013

Forde, Kennedy & Simms              Company Insolvency                      2015

Forde & Simms Bankruptcy Law 2nd Ed 2009

UK Books

Insolvency Law and Practice (Report of the review committee chaired by Sir Kenneth Cork CBE, 1982, Cmnd 8558) (the Cork report)

V Finch, Corporate Insolvency Law: Perspectives and Principles 3rd Ed 2017

RM Goode, Principles of Corporate Insolvency Law (4th Ed, 2011)

A Keay and P Walton, Insolvency law: corporate and personal (4rd Ed, 2017)

Marsh Bankruptcy Insolvency and the Law 2016

WW McBryde, Bankruptcy 2nd Ed, 1995

Butterworths Insolvency Law Handbook 14th Ed 2012

Core Statutes on Insolvency Law and Corporate Rescue (annual editions)

Legislation

Personal Insolvency Legislation

Personal Insolvency Act 2012

Personal Insolvency (Amendment) Act 2015

Personal Insolvency Act 2012 (Part 6) (Commencement) Order 2013, S.I. No. 14 of 2013

Personal Insolvency Act 2012 (Commencement) (No. 2) Order 2013, S.I. No. 63 of 2013

Personal Insolvency Act 2012 (Establishment Day) Order 2013, S.I. No. 64 of 2013

Personal Insolvency Act 2012 (Authorisation and Supervision of Personal Insolvency Practitioners) Regulations 2013, S.I. No. 209 of 2013

Personal Insolvency Act 2012 (Authorisation of Approved Intermediaries) Regulations 2013, S.I. No. 216 of 2013

Personal Insolvency Act 2012 (Personal Insolvency Practitioner Authorisation and Renewal of Authorisation Prescribed Fees) Regulations 2013, S.I. No. 246 of 2013

Personal Insolvency Act 2012 (Accounts and Related Matters) Regulations 2013, S.I. No. 247 of 2013

Personal Insolvency Act 2012 (Commencement) (No. 3) Order 2013, S.I. No. 285 of 2013

Personal Insolvency Act 2012 (Value of interest in property) Regulations 2013, S.I. No. 330 of 2013

Personal Insolvency Act 2012 (Prescribed Protective Certificate Personal Insolvency Arrangement Application Form) Regulations 2013, S.I. No. 331 of 2013

Personal Insolvency Act 2012 (Prescribed Protective Certificate Debt Settlement Arrangement Application Form) Regulations 2013, S.I. No. 332 of 2013

Personal Insolvency Act 2012 (Prescribed Debt Relief Notice Application Form) Regulations 2013, S.I. No. 333 of 2013

Personal Insolvency Act 2012 (Schedule of Creditors) Regulations 2013, S.I. No. 334 of 2013

Personal Insolvency Act 2012 (Procedures for the Conduct of Creditors’ Meetings) Regulations 2013, S.I. No. 335 of 2013

Personal Insolvency Act 2012 (Notification in relation to Excludable Debt) Regulations 2013, S.I. No. 337 of 2013

Personal Insolvency Act 2012 (Additional Information to be contained in the Registers) Regulations 2013, S.I. No. 356 of 2013

Personal Insolvency Act 2012 (Part 4) (Commencement) Order 2013, S.I. No. 462 of 2013

Personal Insolvency Act 2012 (Prescribed Fees in Bankruptcy Matters) Regulations 2013, S.I. No. 465 of 2013

Personal Insolvency Act 2012 (Prescribed Financial Statement) Regulations 2014, S.I. No. 259 of 2014

Personal Insolvency Act 2012 (Regulatory Disclosure Statement of a Personal Insolvency Practitioner) Regulations 2014, S.I. No.319 of 2014

Personal Insolvency Act 2012 (Written Statement Disclosing All of the Debtor’s Financial Affairs) Regulations 2015, S.I. No. 416 of 2015

Personal Insolvency Act 2012 (Prescribed Fees) Regulations 2015, S.I. No. 620 of 2015

Personal Insolvency Act 2012 (Renewal of Authorisation of Personal Insolvency Practitioners) Regulations 2016, S.I. No.226 of 2016

Justice Courts and Civil Law (Miscellaneous Provisions) Act 2013

Courts and Civil Law (Miscellaneous Provisions) Act 2013 (Part8) (Commencement) Order 2013, S.I. No. 286 of 2013

Courts and Civil Law (Miscellaneous Provisions) Act 2013 (Part 7) (Commencement) Order 2013, S.I. No. 463 of 2013

Courts and Civil Law (Miscellaneous Provisions) Act 2013 (Section 2) (Commencement) Order 2014, S.I. No. 334 of 2014

Personal Insolvency (Amendment) Act 2015 (Commencement) Order 2015, S.I. No. 414 of 2015

Personal Insolvency (Amendment) Act 2015 (Commencement) (No. 2) Order 2015, S.I. No. 514 of 2015

Bankruptcy Act 1988

Bankruptcy (Amendment) Act 2015

Bankruptcy Act 1988 (Commencement) Order 1988, S.I. No. 348 of 1988

Bankruptcy Act, 1988 (Alteration of Monetary Limits) Order 2001, S.I. No. 595 of 2001

Bankruptcy Act 1988 (Official Assignee Accounts and Related Matters) Regulations 2013, S.I. No. 464 of 2013

Bankruptcy (Amendment) Act 2015 (Commencement) Order2016, S.I. No. 34 of 2016

Rules of the Superior Courts (Bankruptcy) 2013, S.I. No. 461 of 2013

Rules of the Superior Courts (Bankruptcy) 2016, S.I. No. 232 of 2016

Rules of the Superior Courts (Bankruptcy) 2012, S.I. No. 120 of 2012

Bankruptcy (Amendment) Act 2015 (Commencement) (No. 2) Order 2016, S.I. No. 253 of 2016