The architect of a Bill which reduces the bankruptcy term from three years to one year has called for credit rating impairment rules to fall into line with the new laws.

The Seanad will approve the new Bankruptcy Bill on Thursday with it taking effect early in the new year.

Labour TD Willie Penrose, who originally proposed the Private Members' Bill which cut the bankruptcy period before it was formally introduced to the Oireachtas by Minister for Justice Frances Fitzgerald, said the next step would see credit rating rules changed to allow people recover from financial distress faster.

At present, the Irish Credit Bureau, which is owned by the major Irish banks as well as credit card providers and credit unions, is the leading credit checking agency in the State while Stubbs' Gazette also operates in the field.

A new statutory register is to be set up next year to give lenders accurate and up-to-date information about borrowers’ credit history. Lenders will be forced to check the register when borrowers seek loans of more than €2,000.

Under bureau rules, a person who has defaulted on a loan or missed even a single payment can have a black mark against their credit history for a period of five years. Mr Penrose said that period should be shortened to allow people who struggled financially during the crash “to get back on their feet”.

He also expressed satisfaction that the new Bankruptcy Bill has progressed through the Dáil and suggested it “would put manners on banks who have treated people with contempt”.

He said it would “alter the dynamic of a relationship which has left people disempowered and afraid even to open letters and answer the telephone”.

Mr Penrose said it would take three or four months before the impact of the new law would be felt and distressed borrowers would feel more empowered than at present.

"We have this condemnatory attitude to bankruptcy in Ireland. It is almost vindictive and instead of saying to people 'thank God you tried' we castigate them for failing."

He stressed bankruptcy would still be a last resort for people and pointed out the process was “not a walk in the park” and would not be “embarked upon lightly”.