Senior debt advisor Mike Morgan discusses the new CCCS Guidelines and how their expenditure to income benchmarks could mean future IVA holders finding themselves worse off financially because of it.
When looking at possible new IVA cases, or indeed when reviewing existing ones, Insolvency Practitioner’s will generally refer to a set of guidelines to set a benchmark as to what is fair and reasonable to allow as expenditure against income.
This benchmark will determine the amount the individual has to contribute towards the arrangement. The guidelines used are generally ones supplied by the Consumer Credit Counselling Service, or CCCS for short. It should be stressed at this point that any proposal should be driven by actual expenditure rather than guidelines, but nonetheless, some creditors and their representatives view these guidelines as being set in stone, and, if exceeded, will ask for that item of spending to be cut back to fit within those guidelines. If our client has a genuine reason for the expenditure we always argue the point, and often win.
New guidelines have recently been circulated, which, in fairness, have seen some guideline budget allowances being increased from the previous set (circulated in 2008). No new guidelines were issued in 2009. Here at ClearDebt we welcome any increase in budget guidelines.
Family budgets are hard enough pressed as it is, what with pay freezes, child benefit freezes…
Family budgets are hard enough pressed as it is, what with pay freezes, child benefit freezes, tax credit reduction and the such like, not to mention the ever present volatility of the job market itself.
New CCCS guidelines
However, careful analysis of these new guidelines shows that, whilst certain expenditure allowances have increased, others have dramatically decreased. As an example, I have worked out that for a family of four – two working adults, two children of school age, running two cars – if guidelines were to be applied rigorously to this scenario making pretty much all expenditure allowances possible against income, then under the new guidelines, the proposed payment to creditors would be £17 more per month than under the old ones. This doesn’t seem much – but for a family already living on a strict budget and in tough times, a loss of £204 (more than £1000 over the likely duration of the IVA) a year could easily make the difference between success or failure of their IVA
With industry guidelines being set like this people in debt are really up against the odds when trying to pay it back.
I cannot fathom why guideline figures for the likes of sports, entertainment, contingency, dental, general medical and hairdressing, amongst others (this list is not exhaustive) should have gone down. Has anyone else noticed the cost of a trip to the dentist getting cheaper within the last two years? IVAs are supposed to be achievable as well as affordable. A person’s creditors can expect them to work hard to repay as much as they can afford of what they owe – but they shouldn’t expect hard labour.
It does very much seem like a case of giving with one hand and taking away with the other. Surely I’m not the only one slightly outraged at the new guidelines – please, help our voice get louder and share your views here.