A week of “essential” stay for people in high debt

Under new guidelines, a week-long ‘stay’ in a caravan in Ireland is now considered a reasonable expense for people with large debts. It can be good for their mental health and even improve their ability to repay.

The guidelines on reasonable living expenses for insolvent people and those in arrears on mortgages have been amended to include a week’s stay based on the rental price of a caravan.

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

Following recent consultation, it was suggested that an allowance be included in the fixed costs to cover a week’s domestic holiday based on what it would cost to hire a caravan for a week.

Overall, the rise in the cost of living has led to an increase in the amount of money deemed sufficient to allow people in debt to have a reasonable standard of living.

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

The cost of living has been included in fixed costs, as the view of people seeking change is that if people can enjoy a reasonable standard of living, including some socializing and a modest vacation, this improve their ability 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’s a nod to changed times and a nod to mental health thinking and it’s very modest,” Mr McNaughton said.

“It’s about striking a balance between ensuring that a debtor contributes all they can in terms of income and assets to maximize recovery for the creditor while maintaining a reasonable standard of living.”

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

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John A. Bogar