The Government’s removal of the banks’ veto on personal insolvency deals will only apply in cases where mortgage arrears were built up before the start of this year.

Legislation giving effect to a new court review process for such deals will be brought before the Dáil next week by Minister for Justice Frances Fitzgerald.

The Government announced plans giving courts the power to overrule banks which rejected proposals from borrowers with arrears.

These allowed the Circuit Court to impose alternative arrangements to those suggested by banks or other lenders. Should the court decide a bank had unreasonably rejected a settlement, it could impose an arrangement if it felt it was workable and in the public interest.

Under Ms Fitzgerald’s legislation, the court review will apply where the mortgage arrears have been incurred on a principal private residence.

Sources said the arrears must be “incurred before 1 January, 2015, before the Government decision on mortgage arrears was discussed, in order to target the proposal primarily to the specific problem of arrears incurred during the period 2007-2014”.

Ms Fitzgerald said “the new provision for independent review by the courts is an important reform to protect distressed mortgage-holders”.