The Government has confirmed that people will be able to agree deals to write down mortgage debt as part of personal insolvency arrangements.
However, such deals will require a majority of creditors such as banks agree to deals on a case-by-case basis.
These would be non-judicial settlement arrangements.
Tánaiste Eamon Gilmore said the legislation would assist those in serious debt situations and help to ensure that, as far as possible, people would not lose their homes.
The personal insolvency legislation will not lead to an avalanche of people looking to walk away from mortgage debt, he said.
Mr Gilmore said that people will either have to satisfy the courts or negotiate non-judicial arrangements between borrowers and lenders.
Minister for Justice Alan Shatter said today that the Government had approved the publication of the heads of the Personal Insolvency Bill.
When enacted, he said, it will be one of the key legislative instruments for addressing the financial difficulties of general insolvency; mortgage debt and negative equity.
However, some mortgage experts have said that up to 30,000 homes and properties are likely to be repossessed once the new legislation comes into force.
Dr Michelle Norris of UCD, who has carried out extensive research on mortgage arrears, said around half of the mortgages currently in arrears were "unsustainable".
She said that a "raft of repossessions" will take place once legislation is in place and that over 30,000 properties will be affected.
Karl Deeter of Irish Mortgage Brokers estimates that between 25,000 and 30,000 mortgages are unsustainable and will be subject to repossession.
According to the latest figures from the Central Bank, 8.1% of mortgage-holders have missed payments for three months or more.
Elsewhere, the Money Advice and Budgeting Service has welcomed the draft legislation.
FLAC said the scheme is a significant advance to address the problems of seriously overindebted households in Ireland.
