FINE GAEL will unveil plans to overhaul the country's "Victorian" bankruptcy legislation in the coming weeks in a move the party hopes will inspire enterprise and job creation.

Recognising that those who go bankrupt are not all "reckless", the plan will aim to stamp out "bankruptcy tourism" and assist businesspeople who have been "unlucky" enough to go bankrupt in an effort to help the economic recovery.

Deirdre Clune, the party's front-bench spokeswoman on innovation, has completed the policy document which advocates reform of the laws. It has been approved by the party's frontbench and it will be launched shortly.

Clune said that under current legislation, bankruptcy is viewed as "the result of money mismanagement or fraud. Little thought is given to the people who have worked hard but seen their businesses fail due to the current recession. Our laws take the same view, and severely penalise people for 12 years after the declaration".

Clune told the Sunday Tribune that her new policy document, which is likely to form part of Fine Gael's election manifesto, "is not about people who have been reckless. It's about the people who have just been unlucky and still have a lot to offer in the future.

"I am looking at this from the innovation and enterprise perspective and, as the Innovation Task Force has recommended, if we want to encourage people to establish businesses then we need to overhaul our bankruptcy legislation.

"We have to focus on indigenous enterprise and create local jobs by making sure the threat of bankruptcy is less of a hindrance to job creation. We even have talk of bankruptcy tourism where we have people going abroad to the UK and the US to declare themselves bankrupt."

Under the current law, if a businessperson is declared bankrupt, they cannot obtain a loan for more than €630 without disclosing their status as bankrupt. Their assets are automatically vested and they risk losing their family home.

Clune believes Irish society needs to change the way it views business failures and "remove the stigma associated with failed ventures".

While the details of the Fine Gael plan have yet to be revealed, the government's Innovation Task Force and the Law Reform Commission both recommended last year that the laws, written in 1988, be modernised and brought into line with other European countries. Bankruptcy status is discharged after 12 months in the UK compared to 12 years in Ireland, so it is expected that Clune's policy will advocate bringing our laws into line with the UK.

Fine Gael leader Enda Kenny pledged last week that the "Victorian laws" will be reformed by his party in government.

Last year, the enterprise and science policy advisory board, Forfás, published a report entitled 'Making It Happen: Growing Enterprise for Ireland' that recommended new bankruptcy law that would "distinguish those refusing to pay from those who cannot pay".

The Forfás report claimed it is important that "unnecessary disincentives are not placed in the path of potential entrepreneurs" and as our bankruptcy laws are "more severe than similar laws elsewhere" they may be contributing to "fear of failure and impeding potential investors".