IPA's and the Standard Financial Statement (SFS)

debt_doctor · 30 July 2017 at 12:36PM

IPA's and the Standard Financial Statement.(SFS)

The SFS is a financial statement that has categories of fixed expenditure and flexible costs. Expenses in the fixed expenditure should not be challenged so long as you can provide proofs for them such as receipts etc.

Flexible costs are split in to 3 categories and they are Communications and leisure, food and housekeeping and personal costs. These 3 categories have 'Trigger figures' attached to them which vary dependent upon the makeup of the family. Providing your expenses are within the trigger figures of each category then your expenditure should not be questioned or any reason to provide proofs.

The SFS was not produced for the Insolvency Service (IS) it was developed for and is now used by all of the main debt advice providers such as Citizens Advice, National Debt-line, Step-change, Advice UK and others. The IS have decided to adopt it for expenditure assessment for IPA's and for calculating whether an applicant has less than £50 pm surplus for the purposes of a DRO application.

Like all other debt specialists, I have been using the SFS for a couple of months now but mostly for providing a financial statement to creditors offering anywhere from £1 pm upwards - something many bankrupts will be familiar with before they felt they had to go bankrupt.
It is expected that more statutory / Government organisations are going to adopt the SFS as to what someone can afford to pay back to a debt from their income. The Courts and HMRC are expected to use the SFS in the future.

There will be a period of evolvement for IPA's as the SFS takes away some pre conceived ideas about expenditure that the IS would not allow. Alcohol, smoking, birthdays and such were always said to be items not allowed in expenditure but now this cannot be the case as the SFS has allowances for all these types of expenditure. An organisation cannot adopt the bits of the SFS they fancy - they have to adopt all of it - but I feel there will be variances across the Country as examiners learn to adapt.

The requirements of the Insolvency Act 1986 have not changed in relation to IPA's since the Act came in to force in that a Bankrupt should have sufficient monies to satisfy the reasonable domestic needs of themselves and their family. The Household Expenditure Survey (HES) was the method used to calculate IPAs and what we have been used to on this forum for many years - but no longer.

So, let's get back to those expenditure categories - Fixed Costs, Communications and Leisure, Food & Housekeeping and Personal Costs.

Fixed Costs. - They are what they are. Costs in this category should be accepted providing the spending can be proven by receipts or other proofs. A brief summary of the items in this list are: rent/mortgage, C/tax, utilities, rentals, TV licence, care costs, transport & travel, school costs, insurances, union &professional fees.

Communication & leisure. This category (and the two following categories) have a 'trigger figure' applied to them.( 'Trigger Figure' explanation provided later)Phone, internet & TV packages, film subs, mobile phone, hobbies, leisure, sport, gifts, pocket money, papers, magazines.

Food & Housekeeping: Food shop, groceries, baby items, school meals & meals at work, laundry, alcohol, smoking, vet bills, repairs.

Personal Costs: Clothing & footwear, hairdressing, toiletries, other costs.

What is secret and what is not. The layout and format of the SFS is being provided to all debt clients of all the major advice providers for their clients to understand their debt issue, use it as a budgeting tool and for offers to be made to creditors. It will not be long before there will be hundreds of thousands of these documents in circulation, the layout and format can never be a secret and it would be counter- productive if it were.
The trigger Figures are secret to within the 'debt industry'. This will be the major thing for those on this forum who used to see the suggestions within the HES on the Technical Manual.

Working with 'secret' trigger figures is nothing new at all for the debt industry. For many years we used the Common Financial Statement (CFS) with its own trigger figures (a much better financial statement BTW!) and guided clients to how much is reasonable to spend without revealing the actual ceiling or trigger figure of that category.

The trigger figures vary and adapt to the size and makeup of the family. You won't be surprised to hear that a family of 2 adults and 2 children has a much higher ceiling or trigger figure for Food & Housekeeping than a single adult. All of the 3 discretionary categories work in this way.

I have never revealed an actual trigger figure to a client and I shall not do so on this forum. I have always treat posters on here as if they were my clients in my office and shall continue to do so. In my office it is my job to guide clients to allowing themselves reasonable amount of expenditure before money is made available to creditors. So when a client suggests a housekeeping figure that is (bearing in mind the trigger figure) too low then I would point that out and ask them to think again!

As time goes by posters will say on here what they have been 'allowed' and I will continue to offer my guidance on what might be reasonable. Some on here might start to compile those comments - that is a matter for them. As a starting point, for years I have thought that £300 pm is reasonable for a single persons all encompassing Housekeeping spend, and I haven't changed my mind - And that isn't a trigger figure!

Time will tell and foreseeable problems.
The first issue is that the IS created the online bankruptcy portal with its questions and categories before they decided to sign up to the SFS. It therefore does not ask expenditure questions entirely in the SFS format, so examiners are having to take the information from the online application and 'convert it' to SFS format. This is causing frustration for examiners and the IS need to get their act together and sort out the online portal. I shall soon post how the online portal questions will convert to the SFS so that bankrupts can understand what happens with their information.

Feedback from clients seems to suggest that the IS are indeed working within the spirit of the SFS and I have heard of more than one instance where an examiner has said "I don't think you have allowed yourself enough in that category" I do wonder how some of the other legislation will fit in with the SFS - for instance, Mortgage is a fixed cost and so should be allowed providing proof can be shown but what about the 'Excessive mortgage costs rule?' I suspect that rule will still stand over and above the SFS.

I shall continue to update this Thread, there is a lot to learn - for all of us.
DD

Butts · 30 July 2017 at 1:19PM

Just looking at Payplans Official Budget Guide which claims to be based on the Common Financial Statement.

There is no mention of Smoking or Alcohol even as an appendage in any category or section.

Any idea why not ?

debt_doctor · 30 July 2017 at 1:29PM

Butts wrote: »

Just looking at Payplans Official Budget Guide which claims to be based on the Common Financial Statement.

There is no mention of Smoking or Alcohol even as an appendage in any category or section.

Any idea why not ?

The CFS does indeed have both of those categories - but it seems clear that they say their budget guide is 'based upon' the CFS - which in this case seems to be nail the client to the floor with unrealistic expenses to provide maximum payment to creditors - which creates more revenue for Payplan. This is why I have never sent Payplan one single client, ever.
Payplan are not a charity.
DD

Butts · 30 July 2017 at 1:41PM

debt_doctor wrote: »

The CFS does indeed have both of those categories - but it seems clear that they say their budget guide is 'based upon' the CFS - which in this case seems to be nail the client to the floor with unrealistic expenses to provide maximum payment to creditors - which creates more revenue for Payplan. This is why I have never sent Payplan one single client, ever.
Payplan are not a charity.
DD

To be fair that has not been my experience with Payplan so we will have to agree to differ on that one.

With regard to Alcohol and Cigarettes would £20 and £30 per month respectively for a single person be enough to result in a "stewards enquiry" ?

debt_doctor · 30 July 2017 at 1:50PM

It seems reasonable to include those costs in an overall Food and Housekeeping figure.
Creditors never get the sub categories, so they don't know the breakdown of how Food and Housekeeping is achieved.

I would advise that generally it is wise to place all of the expenditure as groceries, and spend it on what you want.
DD

time_to_get_organised · 30 July 2017 at 2:25PM

Does anyone have any recent knowledge of 'allowances' for a single person that they would be happy to share as a rough guide please ?

Butts · 30 July 2017 at 2:31PM

debt_doctor wrote: »

It seems reasonable to include those costs in an overall Food and Housekeeping figure.
Creditors never get the sub categories, so they don't know the breakdown of how Food and Housekeeping is achieved.

I would advise that generally it is wise to place all of the expenditure as groceries, and spend it on what you want.
DD

So a £300 total for a single person on the Food and Housekeeping Section of the BR form (£280 groceries £20 toiletries £0 meals at work and Alcohol)would not result in a stewards enquiry ?

bewildered1 · 30 July 2017 at 6:06PM

Debt doctor, thank you for the very insightful post. I've found it very helpful.

Just be be sure, and because I'm a little bit slow, am I right in thinking that it would be reasonable for a single person to be allowed £300 per month for just those items you listed in the Food and Housekeeping section? I ask because I am considering bankruptcy and if I am allowed that much it will make life much easier for me.

Also, in that section you include "Repairs" should I take that to mean household repairs as in broken washing machine etc. not car repairs?

debtdepressed · 30 July 2017 at 6:22PM

very useful.

I was advised by a charity 320 a month on food and toiletries for a couple (one being pregnant) and a toddler to high!!! Nappies, wipes, baby bath/shampoo creams etc cost around 45 a month. Plus i only shop at aldi.

debt_doctor · 30 July 2017 at 6:47PM

bewildered1 wrote: »

Debt doctor, thank you for the very insightful post. I've found it very helpful.

Just be be sure, and because I'm a little bit slow, am I right in thinking that it would be reasonable for a single person to be allowed £300 per month for just those items you listed in the Food and Housekeeping section? I ask because I am considering bankruptcy and if I am allowed that much it will make life much easier for me.

Also, in that section you include "Repairs" should I take that to mean household repairs as in broken washing machine etc. not car repairs?

Hi, I find £300pm a reasonable amount to cover everything in the category of Food & Housekeeping, always have done.
Repairs in that section are property repairs. I would put an amount in for appliance repairs in fixed costs. Car repairs (if you are allowed to keep a car) would also be in fixed costs.
DD

debt_doctor · 30 July 2017 at 6:50PM

debtdepressed wrote: »

very useful.

I was advised by a charity 320 a month on food and toiletries for a couple (one being pregnant) and a toddler to high!!! Nappies, wipes, baby bath/shampoo creams etc cost around 45 a month. Plus i only shop at aldi.

I think they were trying to starve you!
DD

IPA's and the Standard Financial Statement (SFS)

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