Ultimately, it is a matter for the Personal Insolvency Practitioner to determine an acceptable level of reasonable living expenses and for creditors to agree on this and vote in favour of it. The Act requires that you have sufficient income to maintain a reasonable standard of living. Accordingly, reasonable living expenses should not be at a level below that proposed under the ISI guidelines. Reasonable living standards may be higher than the ISI guidelines propose where it is acceptable to creditors. This may occur where creditors can see value for themselves in incentivising you, the debtor.
As a general principle, the ISI wishes to see you retaining the autonomy to make your own choices as to what is best for you, though necessarily within the constraints of reasonableness and the overall expenditure limits. So long as an applicant for one of the three new personal insolvency processes under the Act comes within the overall headline figure for reasonable living expenses, the ISI will not be prescriptive in terms of what the applicant can or cannot spend their money on. Only where an applicant spends in excess of what is considered to be reasonable under these guidelines will it become necessary for the PIP to look at his or her spending across the categories of expenditure. Set Costs The costs attributed to a typical household in the ISI guidelines are termed ‘set costs’. To these are added 1) the reasonable costs of housing and 2) the reasonable costs of childcare and 3) costs arising in special circumstances such as health problems. This produces the total for Reasonable Living Expenses for the household.
The figures produced by the ISI are dependent on: – the number of adults and children in the household; – whether a car is required; – the age of any children. Where only one adult resides in the household, the reasonable living expenses for that adult and any dependents will be fully attributed to that adult. Where two adults reside in the household then it will be presumed that the reasonable living expenses of the household are split equally between them, though a debtor may rebut this presumption and produce evidence to show that he or she pays a different proportion of these reasonable living expenses. Where adults reside together in a house-sharing arrangement, the reasonable living expenses of the debtor should be based on those of a single person. In such cases, the PIP should assess the reasonableness of the rent based on the portion which the debtor pays rather than the rent of the property.