Guidelines as to what constitutes a reasonable standard of living and reasonable living expenses were prepared by the Insolvency Service of Ireland (ISI) in accordance with Section 23 of the Personal Insolvency Act 2012. They were first issued in April 2013 and reissued in June 2013 to include changes in the Consumer Price Index. The ISI chose a model which is a modified version of the consensual budgeting standards model originally developed in Ireland by the Vincentian Partnership for Social Justice backed up by over 12 years of research.
The guidelines are intended to give a debtor protection in that they establish a minimum standard below which a debtor cannot be obliged to live. They are based on the expenses a person necessarily incurs in achieving a reasonable standard of living defined as one which meets a person's physical, psychological and social needs. This does not mean that a person should live at a luxury level but neither does it mean that a person should only live at subsistence level. The guidelines were broadly welcomed by consumer and advocacy groups upon their publication. They were seen as essential to the process of moving towards long-term restructuring measures in that they enable the debt-servicing capacity of a distressed debtor to be calculated in a fair and consistent manner so that the sustainability of repayments can be established over the course of the arrangement, be it three years or six years.
Where an arrangement is proposed, the decision on the reasonableness or otherwise of living expenses will be a matter for debtor and creditors to determine on a case-by-case basis with the personal insolvency practitioner acting to facilitate an arrangement acceptable to both. The guidelines on a reasonable standard of living and reasonable living expenses strike a balance between the interests of the debtor and those of his or her creditors and so enable arrangements to be put in place which are capable of lasting the specified duration. It is worth noting that each arrangement is subject to an annual review at which time variations to the arrangement are possible.
I should also like to advise the Deputy that a mechanism exists for sending comments or observations on the reasonable standard of living and reasonable living expenses guidelines directly to the ISI by emailing: email@example.com.