The Central Bank has announced a new scheme that aims to relieve the pressure on over-stretched Irish borrowers.

The scheme will follow the same process of insolvency and could allow some borrowers to completely write off what they owe to unsecured lenders like credit card companies and even credit unions.

The new structure will operate on a pilot basis from next month.

The Minister for Jobs, Enterprise and Innovation Richard Bruton says the pilot scheme needs to work out the "difficult disagreements" between banks and credit unions over who gets paid first.

The scheme was announced by the Central Bank yesterday and will help around 750 homeowners who are in arrears with multiple lenders.

It includes extending the loan term, reducing interest rates and could in some cases, result in debt write-off.

Jobs Minister Richard Bruton spoke to reporters about the scheme

 The Bank says the framework "is designed to produce fair, reasonable and consistent outcomes for dealing with secured and unsecured debt from multiple lenders" and that it establishes "a series of principles to be applied in debt restructuring solutions for borrowers. In particular it outlines a ‘Resolution Waterfall’ which sets out a series of debt affordability scenarios".

Director of Credit Institutions and Insurance Supervision, Fiona Muldoon, said, "The aim of the scheme is to test the viability of the proposed negotiated approach and to determine its effectiveness in achieving workable sustainable outcomes for borrowers and lenders. Participation in the pilot scheme is open to secured and unsecured lenders".

"I expect that the lenders participating in the pilot scheme will include all the main retail banks and many credit unions as well as other unsecured lenders. The Central Bank of Ireland will be closely engaged throughout the process and will oversee the pilot" she added.

"Many questions on the scheme"

However there has already been some criticism levied at the pilot scheme. Sinn Féin Finance Spokesperson Pearse Doherty has called for more clarity for people.

"I am happy to see a proactive approach from the Central Bank and the introduction of a system which, if adopted, would provide greater transparency for borrowers...I do have many questions on the scheme. Why only weeks after the Insolvency Service began taking calls has this alternative pilot scheme been launched? Why are, in the final stages ,unsecured creditors like Credit Unions expected to write-down debt but at no stage is this asked of banks?" he said last night.

"The Central Bank needs to clarify what exactly this scheme would mean for struggling homeowners in particular. It must safeguard the Family Home and produce sustainable arrangements including write-downs on secured debt where necessary" he added.

While Fine Gael member of the Oireachtas Committee on Finance Michael D'Arcy has welcomed the move.

"This initiative, which is to be run for a three month period, aims to set out a number of debt management scenarios for a representative sample of borrowers who are unable to meet their mortgage and other debt payments. The pilot scheme is designed to find satisfactory solutions for those who are unable to manage their debts without them having to enter into the full insolvency process" he said.

Fran D'Alton is a financial coach and author of 'Making a Deal with your Bank'. He says under insolvency unsecured creditors get burned.

And he he told Breakfast here on Newstalk that this scheme aims to try and combat that by restructuring borrowers mortgages and making unsecured debt more servicable.