This article is one in a series of articles discussing how ‘Reasonable Living Expenses’ (RLEs) guidelines might work for people who are struggling with debts or their mortgage. RLE’s are guidelines provided by the Insolvency Service of Ireland (ISI) that ensure you have a reasonable budget for living. They also help your Debt Advisor or PIP (Personal Insolvency Practitioner) calculate a realistic level of affordability for your circumstances and debts, whilst allowing them to determine if any of the available debt solutions are a viable option for you.
RLE’s are divided up into a few different categories:
- Set Costs: These include necessities such as food, clothing, transport, utilities and socialising as well as other categories, which the ISI have identified as necessary for a reasonable standard of living.
- Other Costs: These are costs which are essential but might vary in amount depending on each household, such as a mortgage or rent, any additional vehicles, childcare costs and various types of insurance.
- Special Circumstances: These are essential costs for people who might have specific requirements or needs in relation to their specific situation, such as people of a specific age, people with health needs, or people who might have a disability that requires additional expenses. For example, there might be a requirement to care for an elderly relative who is financially dependent or there might be a child that is attending college…
In previous examples we have discussed RLE’s for various types of families, a couple and a single person with a car. In this example we will discuss a single person, struggling with debt, that has no car. We will call him George. His household and financial details are as follows:
- George rents a small apartment on his own. His rent is €1,500 per month.
- He works full time and is a PAYE employee.
- George uses Public transport for all his travel necessities.
- George is struggling with unsecured debt repayments totaling approx. €30,000.
His RLE works out as follows:
Adult set costs: €1084.93
Rent costs: €1,400
Total RLE: €2484.93
There may be two solutions open to George, depending on how much his take home pay is each month. We’ll explore both options for demonstrative purposes.
Option 1: A Debt Relief Notice (DRN)
George’s total allowable expenses for his set costs and rent come to €2,484.93. If he took home €2,541.35 per month in wages, he would have €56.42 left over each month after the RLEs are deducted. This would make him a suitable candidate for a Debt Relief Notice (DRN) as he has no assets, a low monthly disposable income and his debts are below €35,000. In a Debt Relief Notice, he could be free of all unsecured debts after 3 years.
Option 2: A Debt Settlement Arrangement (DSA)
If George took home a higher wage each month of, say €2,741.35, then his disposable income would be €256.42 each month. He would no longer be suitable for a DRN, as the disposable income threshold is €60. He may in this scenario, be a suitable candidate for a Debt Settlement Arrangement (DSA). If creditors accepted his DSA proposal, he would pay this amount of €256.42 for 60 monthly payments, allowing him to repay some of his debts back (almost half after PIP fees are considered). On completion of the DSA, any remaining unpaid debts would be written off and George could start over again, free of debt.
€256.98 * 60 = €15,385.20
Please bear in mind that this is just a hypothetical example which illustrates a very straightforward process of a typical DRN and DSA for a single adult with no car that lives alone in rented accommodation. This example is not based on a real person, but is a demonstration to explain how RLE’s may be calculated and how a DSA might work.
The figures and calculations for RLE’s provided in this article are accurate as of the date of publication in this hypothetical scenario. However, it’s important to note that information can change. Therefore, these figures may be subject to change in the future. We recommend checking for the most current RLE information if you require the latest information beyond the publication date.
If you are struggling financially and would like an idea of the budget that you could be allocated, if you were to pursue an Insolvency solution, click here to work out your own RLE expenses.
For more information on the RLE guidelines and the Insolvency Solutions available to help you deal with your secured and/or unsecured debts, get in touch on 01 247 88 99 or fill in the form below and we will contact you.