If you are insolvent and hope to avail of one of the three new debt solutions now becoming available under the Personal Insolvency Act 2012, there is considerable information on allowable personal expenditure now published by Insolvency Service of Ireland (ISI).Personal expenditure is broken down under fifteen headings and allowable limits of expenditure under thirteen of these headings are provided. Of course if you adhere to the total expenditure limit allowed, you can exceed your personal expenditure under individual headings. In other words, you are allowed some discretion in regard to how you spend your money. If you can cut down spending in one area you can increase it elsewhere. We will look at these thirteen headings later.
First we will look briefly at the two expenditure headings which are considered to be variable and for which no set expenditure limits are prescribed. They are Childcare and Housing. Since the cost of full or part-time childcare is dependent on the employment status of the adult(s) in the household and on the age(s) of the child or children, the assessment of whether childcare costs are reasonable is left to the Authorized Intermediary (AI) or to the Personal Insolvency Practitioner (PIP) whom you enlist to assist you in proposing your chosen debt solution to your creditors. Of course creditors will have the final say on the reasonableness or otherwise of all your expenditures including childcare costs, insofar as they can reject your proposal if they so wish. The same applies to your housing cost which will normally be the cost of renting or your mortgage payments. The AI or PIP will make a judgment on whether the cost is reasonable but the creditors exercise the final judgment.
Food is the first of the thirteen prescribed items of expenditure and a single adult living alone is allowed €247 per month but if he or she has children the allowance is €219 per month. The food allowance for two adults is €364 but if they have children it is just €279. The food allowance for children varies considerably depending on their ages but also on the number of adults in the household. Food allowances are higher for children where there is only one adult in the household. Tables are provided with an extensive range of scenarios covered.
The same applies to the second prescribed item i.e. clothing which is €36 per month for an adult living alone, and €67 for a couple with different amounts allowed for children depending on their ages.
The other eleven items of prescribed expenditure are dealt with similarly. For a single adult living alone they are: personal care €33; health €31; household goods €31; household services €29; communications €43; education €25; transport €136 if public and €240 if private i.e. a car; household energy €49 for electricity and €57 for heating; insurance €12 for home and €26 for car (if needed); savings and contingencies €43; social inclusion and participation €126. Again, where there are children in the household or two adults with or without children, tables of allowable expenditures are provided.
The thirteen items for which detailed expenditure limits are prescribed are cumulatively described as ‘set costs’ and once you have worked out what these are in your particular circumstances you add on childcare costs (if applicable), housing costs (rent or mortgage) if any and the costs of any special circumstances that may apply to your household such as the costs associated with a dependent with a disability. From this total you must deduct the amount of child benefit which the household receives to arrive at the total allowable household expenditure for your household.
While the process described above sounds complex, in fact it is quite simple and once you have determined the total expenditure allowed for your household you subtract this figure from the total net household income. The difference will be your disposable income i.e. the amount available to pay off your unsecured debts such as your overdraft, credit cards, personal loans, credit union loans, overdue utility bills and store cards as well as any ‘excluded debts’. ‘Excluded debts’ are for example family maintenance payments under court order, court fines in respect of criminal offences, liabilities arising out of personal injury or wrongful death claims awarded by the court and liabilities arising from loans obtained by fraud. If disposable income or D.I. is insufficient to pay your unsecured debts and your ‘excluded debts’, if any, as they fall due, you are indeed insolvent and you may be eligible to apply for one of the three new insolvency solutions now becoming available i.e. a Debt Relief Notice or DRN, a Debt Settlement Arrangement or DSA and a Personal Insolvency Notice or PIA.
Written by Paddy Byrne 08/05/2013