Working Out A Sensible Budget For PIA
The success of a PIA rests primarily on your ability to stay within a budget for its duration so you can pay your PIP, and in turn creditors, on time every month. This budget is compiled very early on in the PIA process well before your application, as your specific financial circumstances will determine whether you can apply for it in the first place.
The budget starts with a Prescribed Financial Statement (PFS), which is a complete snapshot of your financial situation and includes what you earn, spend, own and owe. You will need the help of your Personal Insolvency Practitioner to fill it in, and based on what it shows will determine whether you can apply for a PIA or whether another debt management solution, such as a Debt Settlement Agreement (DSA) or Debt Relief Notice (DRN) is more appropriate.
The specific details of the PFS must include:
- What you earn (income)
- What you spend (expenditure)
- What you owe to creditors
- Who you owe debts to
- Your assets
- Any instances where you have acted as a guarantor
- Any other information required by the Insolvency Service of Ireland (ISI)
Of all of these, what you spend every month is probably the most important, as it will determine how much you can pay creditors every month and therefore contribute directly to the likelihood of the creditors agreeing to the PIA application.
The PIA process has guidelines on what could be considered reasonable living expenses and there are set costs to adhere to depending on how many adults and children are in the house and whether there are any special circumstances such as disability or infirmity. These costs are set out in tables for ease of reference, and are based on totaling up the allowable costs of each person in the household within the limits given.
Housing costs are a significant part of the budget, although the PIP will be looking to ensure the costs are reasonable and within set guidelines. If the cost of housing is significantly too high, for example if your mortgage costs are far in excess of what is considered reasonable given your income, the PIP may start looking at whether an alternate arrangement is needed.
The need for a household car is an important consideration, and if you live in a city with good public transport links you may be asked to give up your car and use public transport instead. However if you require your own transport for business purposes or getting to work without it would be too difficult you will be able to keep it.
A considerable amount of leeway has been given where there are children, particularly in infancy and pre-school. These two childhood stages are considered some of the most expensive times of a child’s life, particularly if the primary caregiver has to go back to work and the child or children attend daycare.
Finally, any reasonable costs relating to an individual’s personal circumstances are also allowed for, for example, if a member of the household is elderly and infirm, in poor health or has a physical, sensory, mental health or intellectual disability. Where a member of a household has others financially dependent on them, such as an elderly relative or child in college, this can be taken in consideration and there are costs set out for this.
Once the PFS is complete and the PIP is satisfied with content, it is sent to the ISI, along with a witnessed Statutory Declaration. The ISI then considers the PFS and decides whether a) the applicant is eligible for a PIA, b) is able to contribute to a sustainable payment agreement to creditors over six years, and c) whether the debts that are listed as being written off at the end of the PIA term are correct. If satisfied, the details are sent to the Circuit Court, who check the details and agree to issue a Protective Certificate.
From then on you and your PIP have 70 days to prepare your PIA application to present to creditors.
For more information on budgeting during a PIA, call one of our experienced PIA advisers now on 0800 193 1024.