Reasonable living expenses (RLE’s) are a set of guidelines published by the Insolvency Service of Ireland (ISI) to help determine a suitable budget, for people to live on, that are struggling financially and considering entering into an Insolvency Solution. The RLE’s consist of several categories:
- Set Costs which 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 which include costs of items of varying amounts between different households, such as Housing costs, additional vehicles, childcare costs and various types of insurance.
- Special Circumstances which might cover costs for people in relation to needs because of their age, health needs, or if they have a disability. 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…
We have created several articles discussing different hypothetical examples of how the RLE’s might work for people in differing difficult financial situations, which might help explain how the RLE’s might work in more detail.
A couple that live together, have no car, no children, and are struggling financially. We’ll call them John and Kathleen. Their household and financial breakdown is as follows:
- They both live and work in an Urban area
- As they have no car they rely heavily on Public transport for any travel needs.
- They have a similar take home pay each month, so everything in the household is pretty much evenly split.
- They are homeowners with a mortgage
- Their mortgage is in negative equity of about €70,000, with a house value of €200,000 and a mortgage outstanding of €270,000.
- They have a high level of unsecured debt together (€62,000), from having lived above their means over the years.
John and Kathleen have always enjoyed a high standard of living and managed to keep on top of all payments with ease. However, after a difficult financial period of reduced income relating to their employment, they began to struggle with debt repayments.
Instead of seeking help for their debts, they got deeper into debt with further borrowing, in order to try and address the situation. Payments became even more difficult to manage and the debts kept accruing until the situation eventually got worse over time. Eventually some repayments were missed resulting in a spiral of heavy interest and charges.
Realising that they needed help with their debts, they reached out to a local Personal Insolvency company, who ran through an assessment of their situation. A Debt Relief Order (DRN) was ruled out as an option as they did not meet the relevant criteria. A Debt Settlement Arrangement (DSA) was a potential option. Their Reasonable Living Expenses were calculated as follows:
Adult Set Costs:
A couple with no children and no car – €1764.37
Mortgage costs: €1,000
Insurance costs: €42
TOTAL RLEs: €2806.37
John and Kathleen’s total household net income is €3,426 per month. If you take the RLE’s from that, they are left with €619.63 each month to service their debts. This is the affordable amount they could put towards their debts if they were to apply for a DSA. If their creditors were to approve a DSA, they would make 60 monthly payments of this amount. Any PIP fees would be drawn from these payments.
60 * 519.63 = €37,177.80
Above is the total amount they would be paying into the DSA (including PIP fees for managing the DSA). If they keep to payments, their creditors would receive approximately half of the outstanding €62,000 debts back. The remaining unpaid debts would be written off on successful completion of the DSA, allowing John and Kathleen to start over again, free of debt. This is a better outcome for everyone involved, than, say for example Bankruptcy, where creditors might be at risk of receiving a much lower repayment of the outstanding debts and where John and Kathleen would be under much harsher restrictions, than when in the DSA. The DSA would also help protect their home.
Please bear in mind that this is just a hypothetical example which illustrates a very straightforward process of a typical DSA for a couple. This example is not based on a real DSA, nor a specific couple’s financial situation, 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.