Irish bankruptcy rules are set to change dramatically.
The Government has approved the terms of the Personal Insolvency Bill and will publish it on Friday.
The Taoiseach said it was a radical measure that would allow those unable to pay their debts to be discharged from bankruptcy in three years. At present, it takes 12 years to be discharged from bankruptcy.
The new laws will also include non-judicial methods of dealing with debt. This means that those in severe financial difficulty can work out an agreement with their creditors rather than have their case processed through a court. However, this will require the agreement of a majority of creditors before any agreement can be reached.
The Taoiseach said banks would have to be more pro-active in dealing with economic problems which were partially of their own making.
Housing Minister Jan O’Sullivan is due to provide more details on Thursday of the proposed mortgage-to-rent scheme. Under this new scheme, those in difficulties could remain in their house and rent it back from the financial institution.
He also said a new Mortgage Advice Service would be set up over the summer to be overseen by Social Protection Minister Joan Burton.
The Cabinet approved the legislation this morning as part of the Government’s Action on Mortgage Debt.
The Government Economic Management Council, comprising the Taoiseach, Tánaiste, the Ministers for Finance, Public Expenditure and Reform will meet with the main banks to brief them on the strategy and discuss their approach to mortgage arrears.
The Tánaiste said that the bill would bring about fundamental change in personal insolvency law and that it would also bring in new forms of legal protection for people who are in debt, though not in full bankruptcy.