Published on January 20th, 2014 | by Falcon0
Expenditure Allowances During A Debt Settlement Arrangement
If you’re considering a debt settlement arrangement (DSA) to deal with your debts it’s natural to be concerned about whether you’ll be allowed enough money to live reasonably. As the arrangement will run for a period of five years (usually) it’s important to be reassured that you and your family will be able to manage on the relevant expenditure allowances.
There is a standard system of expenditure allowances that are used. They’re based upon ensuring that a “reasonable standard of living” can continue. That’s a pretty broad description of course; how is this standard actually defined?
The high-level definition from the Insolvency Service of Ireland (ISI) is that “a reasonable standard of living is one that meets a person’s physical, psychological and social needs”. That includes some scope for community and leisure participation for example, rather than simply covering the most basic of human needs like food and housing.
You’ll get a personalised allowance to pay for your home (mortgage or rent) and any childcare services that you reasonably require. If you need to operate a car an allowance will be made for the associated expenses. Most other expenses are covered by a matrix of allowances which apply according to the size of your family and the ages of your children. You can review this matrix on the ISI website.
The above allowances will be totalled and subtracted from your total income. Any extra surplus cash that remains is likely to be the monthly contribution you agree to offer as part of your debt settlement arrangement. In this way you’re granted enough money to look after your needs and the needs of your dependents. Your creditors are hopefully reassured that you’re repaying what you reasonably can be expected to towards your debts.
What happens if you or a family member has a particularly high or unique expense? This might be the case, for example, if someone has extra costs associated with a physical condition. Talk to your personal insolvency practitioner if this is the case as it is possible for them to present these special circumstances to your creditors. Early feedback from the first debt settlement arrangement cases presented to creditors seems to indicate that the banks will have an open mind where there are justifiable non-standard expenses.
If you contact a suitably qualified adviser (such as a personal insolvency practitioner) they’ll be able to explain how much you and your family would be assigned to cover your living expenses. This will also provide you with a strong indication of how much your monthly debt settlement arrangement payment might be. Being in this position will allow you to better consider whether a DSA is an option you’d like to proceed with.
What happens if there is little or no surplus income available after your living expenses have been calculated using the expenditure guidelines matrix? If you have no assets that you can sell this will probably mean that a DSA is not an option that is available to you. This shouldn’t necessarily cause excessive concern however as it’s very likely that alternative options will exist.
The advice team at Debt-Settlement-Arrangements.ie would be pleased to discuss any aspect of the personal insolvency expenditure guidelines with you. They understand that personal insolvency can be both confusing and a worrying prospect. By talking through your circumstances and concerns it should be possible to identify options to deal with your debts and share information with you about them. This is the first (and often the most important) step towards regaining control over your finances.
Author: Debt-Settlement – Arrangements.ie is a debt advice online resource. On our website you can find out everything you need to know about debt settlement arrangements and also the other options to deal with debt problems in Ireland. If you have a question that isn’t answered on our pages you can ask a panel of experts in our forum. You can also contact our experienced debt advisers for one-to-one advice based upon your unique circumstances and needs.