The claim was made by advocacy groups yesterday that expressed concern about the Government’s proposed Insolvency Bill.
Free legal advisors and mortgagee support groups said banks could chase the incomes of debtors five years after they came out of bankruptcy.
The current plans would essentially land troubled debtors with an eight-year bankruptcy term instead of the reduced three under the proposed legislation, the Oireachtas Committee on Justice heard.
Paul Joyce of the Free Legal Advice Centres said there was a five-year “hang on” clause for the banks over pursuing debt.
“This is completely unfair and should be completely got rid of or changed,” he told TDs.
New Beginnings, which represents distressed mortgage holders, said the five-year income payments order after an individual exits bankruptcy was “unnecessary and damages” the new system.
Group co-founder David Hall also warned there was potential for trustees charged with mediating debts under the scheme to act like “wild west cowboys”.
His claim was echoed by insolvency experts who told TDs it was a “no-brainer” that strict rules would be needed on how trustees would operate when representing troubled borrowers.
“We are entering a wild west territory,” said Bill Holohan, of the Irish Society of Insolvency Practitioners. “We are going to get the cowboys coming in.”
The right of banks and lenders to veto insolvency deals under the proposed legislation needed to be changed to give borrowers an avenue of appeal, TDs were also told.
Banking representatives said they were still opposed to mortgage debt being dealt with in out-of-court settlements in the Bill.
Irish Banking Federation chief executive Pat Farrell said banks had helped restructure 70,000 mortgages. Around a quarter of these had payments reduced or mortgages extended, he said.
Concerns about debtors seeking assistance in foreign courts for insolvency or “bankruptcy tourism” were dismissed with his claim that the issue was a “red herring”.
Mr Holohan, though, claimed there were services in Britain which helped arrange bankruptcy for an individual without them having to even step foot on those shores.