What are Reasonable Living Expenses?
The ISI believes that you are entitled to a reasonable standard of living while you address your debt problem. If you tackle your debt using one of the ISI’s solutions, there is a reasonable standard of living that you are entitled to which allows for expenses such as food, clothing, health, household goods and services, communications, socialising, education, transport, household energy, childcare, insurance and modest allowances for savings and contingencies.
The figures used in these guidelines have unique application to personal insolvency and are not intended to be used for purposes other than the stated purposes of these guidelines under the Personal Insolvency Act.
Background information is available here.
Reasonable Living Expenses (RLE) Guidelines
The ISI is required by section 23 of the Personal Insolvency Act 2012 to prepare and issue guidelines as to what constitutes a reasonable standard of living and reasonable living expenses.
Under the model developed by the ISI, reasonable living expenses are the expenses a person necessarily incurs in achieving a reasonable standard of living, this being one which meets a person’s physical, psychological and social needs.
The costs attributed to a household are termed ‘set costs’. To these are added the reasonable costs of housing, childcare and special circumstances where these arise. This produces the total for reasonable living expenses for a given household.
The guidelines are intended to give direction to Approved Intermediaries and guidance to Personal Insolvency Practitioners in assessing, for relevant provisions of that Act, what may be considered ‘reasonable’ in the context of a standard of living and living expenses.
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Set costs can be found by looking up the table contained on pg. 7 of the guidelines and finding which best fits the situation of the applicant based on household composition and on the need of the household for a car. The set costs of a household are compiled by totalling the costs for each individual in the household.
A significant expense arises where paid childcare is needed, particularly at the first two stages of childhood i.e. infancy and pre-school. Where childcare costs are paid they are added to the total for set costs. The Approved Intermediary or Personal Insolvency Practitioner should assess the reasonableness of these expenses taking into account the factors outlined in the guidelines.
Housing can also be a significant expense. In considering what constitutes a reasonable and sustainable accommodation expenditure in an individual case, the Approved Intermediary or Personal Insolvency Practitioner should assess the rent or mortgage payments taking into account the factors outlined in the guidelines.
The differing needs of persons, having regard to matters such as their age, health and whether they have a physical, sensory, mental health or intellectual disability can be accommodated by a debtor specifying reasonable costs which arise as a consequence of ill-health, age or disability under this category of special circumstances. This category may also be used where a debtor has persons other than his or her minor children financially dependent on him or her, such as where the debtor is contributing financially to the care of an adult dependent such as, for example, an elderly relative or a college-going child.
Updates to the Reasonable Living Expenses Guidelines
- In accordance with Section 23 of the Personal Insolvency Act, the Insolvency Service of Ireland (ISI) has issued guidelines as to what constitutes a reasonable standard of living and reasonable living expenses (RLEs) effective from 1st of August 2018.
Since the previous update in 2017, the ISI has liaised with the Vincentian Partnership for Social Justice, to learn about the experience of debtors who are living within the RLEs on a day-to-day basis. It also consults periodically with creditors and other stakeholders to gain insight into how the RLEs are operating in practice.
- In addition the ISI has reviewed the constituent parts of the RLEs and while some categories have changed, the overall effect of inflation has led to a very slight decrease in living expenses.
- Based on the above, the ISI has decided to maintain the RLE figures at their current level.
- An online calculator is available on the Back on Track website for debtors to calculate their own RLEs: https://backontrack.ie/rle-calculator
1 Under the section 23 guidelines on a Reasonable Standard of Living and Reasonable Living Expenses, child benefit has already been deducted from living expenses of a child. This is done on the basis that child benefit payments are intended to be spent on a child. Failure to disregard child benefit payments from income of the debtor when preparing a proposal will effectively result in overstating the amount the debtor has available from which to make payments to creditors; the debtor will appear to have income despite the fact that this money has already been factored into the calculations of the expenses per child