The Minister for Justice has published legislation that he says will provide for a comprehensive reform of the personal insolvency system.

The legislation includes new mechanisms that would allow people to write-off debt without having to go through the courts.

It also reduces the period of bankruptcy from 12 years to three.

The Government is required to introduce new measures dealing with personal and mortgage debt under the terms of the EU-IMF bailout.

Minister Alan Shatter said the legislation is a significant reform of the insolvency regime, allowing for more flexible ways of dealing with people with unsustainable debts and mortgages.

Among the measures included in the legislation are:

  • A debt relief notice that would allow for the write-off of unsecured debt up to €20,000
  • A debt settlement arrangement for the agreed settlement of unsecured debt over five years
  • A personal insolvency arrangement for the agreed settlement of secured debt up to €3m

However, the minister noted that the bill does not provide for an automatic writing off of negative equity, where someone is in a position to service their mortgage they must continue to do so.

Michael Dowling of the Independent Mortgage Advisers Federation has described the bill as significant and said that there was a lot in it to be welcomed.

Speaking on RTÉ's News at One, Mr Dowling said that the Government has taken on board representations made by various parties who have an active interest in this area.

He added that it was significant that canvassing by banks had failed to reduce the limit for the personal insolvency arrangement that would apply to secured debt or mortgages from €3m to €1m.

The Irish Bankers' Federation has said it is disappointed with key aspects of the proposals.

It had lobbied for the amount of debt covered by a Personal Insolvency Arrangement to be lower than €3m.

The federation also said it was disappointed at the creditors’ voting rights in the arrangement.

Minister for Finance Michael Noonan said the legislation will be more important to many people than the debt burden agreement reached in Brussels last night.

Speaking on RTÉ's News at One, Mr Noonan said that he would expect that the legislation would pass through all stages and be enacted into law by late October this year.

Fianna Fáil TD Justice spokesperson Dara Calleary gave the scheme a guarded welcome, but criticised the involvement of the courts in its provisions.

The bill proposes that all arrangements must be approved by the Circuit Court, but Mr Calleary claimed that would discourage many people.

Fianna Fáil also said there should be a proper appeal system for those who felt a final agreement was unfair.

Elsewhere, New Beginning, who offer support to those facing repossesion, has said that the new law could keep thousands in their homes.

New Beginning barrister Vincent P Martin said that the Bill has the potential to tackle the problem in a real way.