Staycation a reasonable expense while in serious debt, new guidelines say

Rise in reasonable living expenses that set repayments for struggling borrowers

A week's "staycation" in a caravan in Ireland is now considered a reasonable living expense for people with major debts, according to new guidelines. It can be good for their mental health and even improve their ability to repay.

Guidelines for reasonable living expenses for insolvent people and those in mortgage arrears have been changed to include a week’s staycation based on the price of renting a caravan.

The guidelines were introduced with the passage of personal insolvency legislation in 2012 to deal with personal debt setting expenses for individuals to have a reasonable standard of living.

Following a recent consultation it was suggested that an allowance should be included in the set costs to cover a domestic week’s holidays based on what it would cost to rent a caravan for a week.

Overall, the rising cost of living has led to an increase in the sum of money considered adequate for people in debt to have a reasonable standard of living.

For an adult with a motor vehicle, the overall reasonable living expenses have increased by 11 per cent to €1,165 a month, excluding housing costs, motor and home insurance and possible “special circumstances” expenses.

The staycation cost have been included in the set costs because the view of people seeking the change is that if people can enjoy a reasonable standard of living, including some socialising and a modest holiday, it would improve their capacity to repay their debts.

Michael McNaughton, director of the Insolvency Service of Ireland, which issues the guidelines, said the cost was based on the price of renting a caravan for a week in Galway or Waterford.

“It is a nod to changed times and a nod to changed thinking around mental health and it is very modest,” said Mr McNaughton.

“It is striking a balance between making sure that a debtor brings all they can to bear in terms of income and assets to maximise the recovery for the creditor while they maintain a reasonable standard of living.”

The ISI’s guidelines are reviewed annually and are likely to increase again given the rising cost of living.