MORE THAN 21,000 people could make use of the new personal insolvency legislation in its first full year of operation, the Dáil has heard.

An estimated 15,000 applications are expected for non-court related settlements and insolvency arrangements as well as upwards of 3,000 bankruptcy applications. There were about 30 bankruptcy decisions made last year. A further 3,000-4,000 applications are anticipated for debt-relief notices, Minister for Justice Alan Shatter has said.

He revealed the figures as he introduced the radical legislation designed to overhaul the law on bankruptcy and personal insolvency. The estimates were tentative but they had planned for this number, based on a “rough extrapolation” from figures for Britain and Northern Ireland.

The Personal Insolvency Bill establishes a non-judicial debt settlement system and sets up an independent body called the Insolvency Service to oversee the non-judicial system. It also radically reforms the length of bankruptcy from 12 to three years.

Mr Shatter said there were complex legal issues involved in the reforming legislation, which contains almost 150 sections. It is expected to be passed by the end of the year.

He stressed that the Bill “will carefully distinguish between individuals who can’t pay as opposed to those who won’t pay so as to ensure there is no suggestion that borrowers can easily leave outstanding debts behind them”.

The Bill should contribute to greater stability in the financial sector because it would incentivise the banks to reach an agreed solution with those in mortgage debt arrears, he said.

Fianna Fáil justice spokesman Dara Calleary said “the key weakness in the Bill is the lack of some kind of third-party arbitration process” and his party was looking for an agency like the Money Advice and Budgeting Service (Mabs) to do this.

Much of the legislation was very strong but “it is inconsistent with what is going on in other parts of Government and other departments”.

Mabs would have a key role but it was completely under-resourced, he said. There could be 400 applications a week. Mabs would be one of the first points of contact and the Minister for Social Protection “needs to get her act together” in this area.

Sinn Féin spokesman Jonathan O’Brien said banks would retain a veto and “there will be no legal obligation on them to accept what could be very reasonable applications from customers”. There was no right of appeal and this could leave debtors with no option but to declare bankruptcy.

Independent TD Catherine Murphy accused AIB of attempting to subvert the legislation following media reports of an internal bank memo in which she said AIB stated it would not offer a write-down of mortgage debt.