Allowance 'shield' for families
An average family with two children will be allowed up to 2,094 euro a month to provide a reasonable standard of living and strike a debt deal with their bank.
Holidays are not an option for struggling borrowers under the new personal insolvency regime, but some leeway will be given to families to keep satellite TV and a car and portions of debts may be written off where it is proven that repossession is of no value to a bank.
Director of the Insolvency Service of Ireland (ISI) Lorcan O'Connor reassured families whose income does not meet childcare costs, insisting that a working parent will not be forced to sacrifice their job.
Mr O'Connor said: "Where their income is lower than childcare costs, the practitioner will look at that, so long as there is an income rationale," adding there would be flexibility within the guidelines allowing people to stay in work - for example where an individual expects to get a promotion further down the line or believes their childcare costs might come down.
Parents will also have to provide a personal insolvency practitioner (PIP) and bank with proof of their childcare costs with receipts and bank statements.
The insolvency measures include three separate solutions, which will be open to applicants at the end of June, including a Debt Relief Notice, Debt Settlement Arrangement and Personal Insolvency Arrangement, the solutions being aimed at restoring an insolvent individual back to solvency within three to six years - without them having to resort to bankruptcy.
The guidelines stipulate that the average family - with two adults and two children in secondary school, and that runs a car - needs 2,094 euro a month to fund a reasonable standard of living and state such a family could feed itself with 279 euro a month, heat its home with 93 euro, pay for electricity with 91 euro and run a car with 253 euro.
The ISI describes a reasonable standard of living as one which meets a person's physical, psychological and social needs and suggests a debtor should be able to afford to participate in community life, eat nutritious food, keep the home tidy and wear suitable clothes.
PIPs will act as intermediaries between struggling borrowers and their financial institutions in a bid to reach a sustainable solution to their debt under the arrangements, and will ensure that the deal struck leaves the borrower with enough money a month to live in such a reasonable condition.
The PIP would assess the individual's need for a car. For example, those living in a city are less likely to need a car but would be allowed one if public transport is inadequate and a car is necessary to get to work, school and shopping, which may apply to parents whose children have left home for university and have no intention of returning to stay permanently.