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    • debt doctor
    • By debt doctor 30th Jul 17, 12:36 PM
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    debt doctor
    IPA's and the Standard Financial Statement (SFS)
    • #1
    • 30th Jul 17, 12:36 PM
    IPA's and the Standard Financial Statement (SFS) 30th Jul 17 at 12:36 PM
    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
    Last edited by debt doctor; 30-07-2017 at 12:43 PM.
    Debt Doctor, Debt caseworker, Citizens' Advice Bureau .
    Impartial debt advice services: Citizens Advice Bureau Find your local CAB *** National Debtline - Tel: 0808 808 4000*** BSC No. 100 ***
Page 2
    • debt doctor
    • By debt doctor 24th Aug 17, 9:48 PM
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    debt doctor
    On the Bankruptcy Application Form there is a section entitled "Pension, Insurance and Healthcare" with entries required for Life Insurance, Dentistry and Opticians.

    Am I right in thinking Life Insurance should be in the fixed expenses section ie not part of the budget for variable expenses ?

    What about Dental and Optical which of the three new categories does that fall under ? - Personal Costs or Communications and Leisure?

    Under the CFS Travel used to be a seperate section if it is in the main fixed expenses bit now does that mean it has no trigger figures ?
    Originally posted by Butts
    Hi, Life Insurance is a fixed cost, as is dental and optical. You are correct that under the CFS travel had it's own category and trigger figure - this is now under fixed costs which means the travel figure should be accepted if proof can be given of the expenses - if it was under a trigger figure then proof would not be needed unless trigger figure exceeded.
    DD
    Debt Doctor, Debt caseworker, Citizens' Advice Bureau .
    Impartial debt advice services: Citizens Advice Bureau Find your local CAB *** National Debtline - Tel: 0808 808 4000*** BSC No. 100 ***
    • Butts
    • By Butts 24th Aug 17, 10:55 PM
    • 143 Posts
    • 46 Thanks
    Butts
    Hi, Life Insurance is a fixed cost, as is dental and optical. You are correct that under the CFS travel had it's own category and trigger figure - this is now under fixed costs which means the travel figure should be accepted if proof can be given of the expenses - if it was under a trigger figure then proof would not be needed unless trigger figure exceeded.
    DD
    Originally posted by debt doctor
    Hi DD,

    I must say I do find it strange that Optical and Dentistry are fixed costs whereas Haircuts for example are variable. What is the logic behind that ? You are far more likely to know the cost of the latter rather than the former. However in relation to the BR Form it does make sense as Optical and Dentistry are in their own little group with Pensions and Insurance.

    With regard to Travel I am unclear as to whether you are saying there is a trigger figure or not as it has moved into fixed expenses. From memory other things in this section are based on actual expenditure or do triggers still exist within this category?
    • TheGardener
    • By TheGardener 25th Aug 17, 7:45 AM
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    TheGardener
    I think 'trigger' figures will be there - its just that the changes have meant we are less clear at this point what they are - as more people post their experiences on the board, we will begin to get a clearer picture.
    Optical and dental are to a degree not optional or something you can DIY, whereas letting your hair grow a bit or getting a GF or Mum to cut it for us are an option
    • Butts
    • By Butts 5th Oct 17, 9:45 AM
    • 143 Posts
    • 46 Thanks
    Butts
    During my Bankruptcy Interview yesterday I asked if they use the SFS Guidlines when completing the allowed expenditure. She confirmed that they did.

    Unfortunately as she skimmed over this area not even mentioning it in any detail until I did so I was unable to garner detailed information.

    For the record I am a single person living in rented accommodation.
    My "trigger figure" expenditure in the three areas is listed below.

    The three categories in the SFS are

    Food and Housekeeping

    Communications and Leisure

    Total Personal Costs Spend

    However on the Bankruptcy Form they are laid out slightly differently so I have indicated which area of the SFS they fall under.

    Bankruptcy Form Actual

    Food and Housekeeping

    Groceries 280.00 (Food and Housekeeping)
    Toiletries 20.00 (Personal Costs)
    Alcohol 0.00(Food and Housekeeping)

    Total 300.00

    Personal and Leisure

    Clothing and Footwear 25.00 (Personal Costs )
    Hairdressing 10.00 (Personal Costs)
    Home Phone I'net TV 63.00 (Communications and Leisure)
    Mobile Phone 5.00 (Communications and Leisure)
    Laundry/Dry Cln 10.00 (Food and Housekeeping)
    Hobbies Leisure Sport 22.00 (Communications and Leisure)
    Newspapers Mags Stat 26.00 (Communications and Leisure)
    Gifts 15.00 (Communications and Leisure)

    Total 176.00

    These figures were all passed without query. I also had £20 down for Emergencies but I'm not sure if that is Variable or part of one of the three SFS Categories.

    Dentistry and Opticians £10 each were accepted and not part of the SFS. Also my Transport Costs BUS/Taxi of £116 Month were not queried but are variable and not part of the SFS.
    • debt doctor
    • By debt doctor 7th Oct 17, 1:10 PM
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    debt doctor
    Thank you Butts, that is very useful information.
    I would just say that dentist/opticians and transport are part of the SFS, but are in fixed costs - so they are what they are and should not be challenged providing the actual cost can be demonstrated.
    DD
    Debt Doctor, Debt caseworker, Citizens' Advice Bureau .
    Impartial debt advice services: Citizens Advice Bureau Find your local CAB *** National Debtline - Tel: 0808 808 4000*** BSC No. 100 ***
    • Butts
    • By Butts 7th Oct 17, 1:24 PM
    • 143 Posts
    • 46 Thanks
    Butts
    Thank you Butts, that is very useful information.
    I would just say that dentist/opticians and transport are part of the SFS, but are in fixed costs - so they are what they are and should not be challenged providing the actual cost can be demonstrated.
    DD
    Originally posted by debt doctor
    No problem what I meant to say was the above were not part of the "big three" triggerable categories but still in the SFS albeit in the as you say fixed costs section.
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