Tánaiste Joan Burton has said a reduced bankruptcy period could send a message to banks who are pulling out of deals with customers in mortgage difficulty.

Ms Burton said she recently met personal insolvency practitioners who told her banks were creating an expectation that arrangements could be agreed but were then disappointing clients.

“If we reduce the bankruptcy period maybe that will send a message to the banking institutions, particularly those who are kind of playing a game of ‘now you see it, now you don’t’, suggesting to people that a deal is possible and then pulling out at the last minute.”

Labour TD Willie Penrose is preparing legislation to cut the bankruptcy period from three years to one year.

Speaking in Dublin this morning, Ms Burton said she had not had an opportunity to read Mr Penrose’s Bill. The bankruptcy period was reduced from 12 to three years at the end of 2013.

She said she wanted to see people staying in their family homes.

“We have an insolvency process vastly reduced in time from 12 years down to three, which is great. But at the same time what the personal insolvency practitioners were saying to me is that...some of the banks are not cutting deals,” she said.

The Tánaiste said people who had “got the courage” to attempt to strike a deal with the bank were often left in a worse situation when “at the last minute the deals are being pulled”.

Ms Burton said not every financial institution acted in this way.

She was speaking after addressing a business event to mark National Employment Week 2015 in the House of Lords, Bank of Ireland, College Green.