This article is one in a series of articles explaining how the “Reasonable Living expenses” guidelines might work for people in various scenarios relating to Insolvency. The Reasonable living expenses (RLE’s) are a set of guidelines published by the Insolvency Service of Ireland (ISI) to help determine a suitable budget to live on, for people 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 you gain an understanding of how the guidelines might work for you.
A single parent called Elizabeth, who is widowed and has 4 children. She is struggling financially and has sought help and advice. Her household and financial breakdown is as follows:
- Her children are aged 1, 3, 7 and 14.
- She works as a nurse in the local hospital.
- She is struggling to manage after losing her husband over a year ago.
- She owns a family car outright, which is about 8 years old and worth about €4,000 in value.
- She wishes to pay back as much of her debt as possible to creditors, but needs to be able to support herself and her children.
- She is a homeowner, but her mortgage current exceeds the value of the house, so is in Negative Equity.
- Her mortgage is costing €900 per month.
- Her childcare costs are €550 per month as she does get some help with grandparents, who look after the children at no cost.
- Elizabeth has unsecured debts of €42,000 (including an overdraft, a loan, a store card and two credit cards). She is struggling to meet her minimum payments and has recently started missing payments, causing increased balances, high interest and penalties.
- The debts became a struggle to pay during her husbands long term illness and deteriorated further after his death.
- They had no mortgage protection insurance, so she became liable for the mortgage payments after her husband died.
Elizabeth gets in touch with a Debt Advisor for some urgent help and guidance. An assessment is carried out to determine all available options. A Debt Relief Notice (DRN) is not suitable for suitable for Elizabeth as her debts are above the threshold and she has a reasonable amount of disposable income left over each month after all RLE’s have been considered. She may be able to apply for a Debt Settlement Arrangement.
Her RLE is worked out as follows:
Adult Set Costs:
A single parent with children and a car – €1354.51
Children Set Costs:
1 infant – €216.51
1 Preschool – €72.36 /pm
1 Primary school – € 233.45 /pm
1 Secondary school – €442.88 /pm
Total household set costs: €2326.79*
*includes adjustments for 3rd and 4th child
Mortgage costs: €900
Childcare costs: €550
Insurance costs: €68
TOTAL RLE: €3844.79
Elizabeth’s total RLE comes to €3844.79. Her total household income works out at €4,084 per month. This leaves her with a disposable income of €239.21 per month. This is the amount she could contribute to her debts in a DSA. Her DSA would consist of 60 monthly payments and any PIP fees would be drawn from these payments.
60 * 239.21 = €14,352.60
Taking into consideration any PIP fees for managing the proposal and the DSA, this means that she would be repaying €14,352.60 throughout the term of the DSA with the new affordable monthly payments, provided her creditors agree to the proposal. On successful completion of her DSA, the remaining outstanding debts would be written off and she would be able to keep her home.
Please bear in mind that this is just a hypothetical example which illustrates a very straightforward process of a typical DSA for a single widow with 4 children of varying ages and a vehicle. This example is not based on a real DSA, nor a specific family’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.