New insolvency rules to allow €899 monthly spend for debtors

Single adult will be permitted €247 for food and and €35.73 for clothes per month

Minister for Justice Alan Shatter unveiled details of how the new insolvency process would work this afternoon. Photograph: Bryan O'Brien / THE IRISH TIMES

Minister for Justice Alan Shatter unveiled details of how the new insolvency process would work this afternoon. Photograph: Bryan O'Brien / THE IRISH TIMES

Thu, Apr 18, 2013, 17:44

Minimum income guidelines for people entering the State’s new insolvency process have not been set in stone or at “subsistence level living or anywhere close to that”, the head of the agency overseeing the process has said.

Lorcan O’Connor of the Insolvency Service of Ireland (ISI) said the new guidelines would be flexible and would not see people’s finances being “micro-managed” by banks or new Personal Insolvency Practitioners (PIPS).

However, he admitted many people would be forced to give up private health insurance, cars and holidays.

The guidelines on a “reasonable standard of living” for insolvent debtors and “reasonable living expenses” are central to the insolvency regime as they set out how much money people will be allowed to spend within any deal agreed with their creditors.

It includes expenditure limits on items such as food and basic medicine.

Under the guidelines a single adult with no car will be permitted expenditure of €898.96 in set cost over and above any mortgage or rent payments. The set costs will rise to €1,030 if that adult has a a car. They will be given €126 a month – or €29 a week to cover social inclusion. An allowance of €204.88 is to made for each child of primary school-going age.

Minister for Justice Alan Shatter unveiled details of the new insolvency process this afternoon in Government Buildingsand the insolvency service has also launched an information campaign. This includes guides to debt settlements along with a website and an information helpline for queries.

Mr O’Connor told The Irish Times childcare costs would come under the microscope but he denied people would be forced to give up work if their earnings were less than the cost of childcare.

He said PIPs would have to “ensure that the child care costs are reasonable” but expressed the view that “it would be completely counter intuitive to ask anyone to give up a job.

“It makes sense for people to remain in their jobs and while there may be some people who have childcare costs in excess of their income there may be reasons for this.”

He said some guidelines, including those referring to childcare costs, had been redrafted in recent weeks to make it clearer that people would not be forced to give up work.

He said the redraft was needed because he felt the flexibility “which is so enshrined” in the ISI’s intentions had not been sufficiently outlined in early drafts. While the wording of the guidelines had changed in recent weeks, he said the numbers had not, Mr O’Connor said.

The ISI has relied heavily on work carried out by the Vincentian Partnership for Social Justice on income guidelines and have been “sense-checked” with both the CSO and the Central Bank as well as the personal insolvency service in the UK counterparts.

Mr O’Connor said the Vincentian Partnership study had been done “in a very scientific way” and its figures were “based on needs rather than wants. I certainly wouldn’t describe the Vincentians as being pro-bank”.