There has been a broadly positive response to the Government’s announcement of a major overhaul of the State’s insolvency system. However there is disappointment in some quarters that shortening the bankruptcy period from three years to one has been put on the long finger.

Lenders have been urged to immediately halt all home repossession cases pending ahead of legislative changes which will be required before the Government’s plans can be implemented.

Lenders should "cease repossession proceedings or adjourn those before the courts until the legislative requirements and systems from today's mortgage support measures are implemented", said David Hall of the Irish Mortgage Holders Organisation. The organisation has been to the fore in calling for a radical reassessment of the insolvency regime in the Republic.

There appears to be substance to the changes announced by the Minister for Finance Michael Noonan said the chief executive of the Irish Brokers Association Ciaran Phelan. He said "some of the elements are still without teeth and the practicalities of the process have yet to be ironed out".

He said the insolvency changes came not “a moment too soon” and he hopes they “will have some positive impact on the mortgage arrears problem in Ireland”.

Mr Phelan said the area which deserved attention was the proposed involvement of the Stepchange charity which was not outlined at today’s Cabinet meeting.

“In essence, they will be funded by the banks through the mechanism of the IBF which may muddy the waters a little when it comes to the perception of impartiality. It stands to reason that banks will probably favour mortgage customers going through the Stepchange route rather than elsewhere – but caution has to be exercised around this – it has to be in the interests of both the mortgage holder and the bank to do so.”

However he said that irrespective of whether or not there would be a bank-funded charity involved in the process "it should be remembered that Ireland already has a debt advice agency in the form of Mabs which has helped thousands of people through their financial struggles".

He said the new measures would increase the importance of the personal insolvency practitioners because banks will no longer have a complete veto on deals and the courts will have a role in resolving some cases so it “will be up to the PIP to present and communicate their client’s case effectively with the judiciary”.

Trevor Grant, of the Association of Expert Mortgage Advisors, welcomes the announcement: "Any steps to remove the torture of long-term financial distress are urgently required."

However, he said “the lack of a reduction in the bankruptcy terms is disappointing. The proof of the pudding will be in the eating. There are far too many borrowers in distress and without any way out because of the inaction of certain lenders who are not helping themselves by adopting an inflexible attitude.”