More than 3,300 personal bankruptcies were recorded last year

The proposals include reducing the bankruptcy period from three years to one and cutting down on the involvement of the courts.

Enterprise Minister Jim Wallace said there is great stigma around personal bankruptcy and he hopes the moves will encourage people to make a fresh start.

Last year there were more than 3,300 personal bankruptcies in Scotland.

'Fresh start'

The reforms would bring Scotland into line with England and Wales where the bankruptcy period has already been cut to one year.

Mr Wallace said: "Personal bankruptcy has serious legal consequences but the stigma lingers on for far too long.

"We want to encourage people to get on with their lives and business, and make a fresh start after a period of bankruptcy."

However, the minister added that creditors needed to have their interests protected.

He said measures were also required to deal with "the small minority" of bankrupts who acted fraudulently.

Mr Wallace said creditors' interests needed to be protected

The reform proposals also include the introduction of time-limited claims against a bankrupt's home and inheritance, intended to strike a balance between creditors getting their money back and letting debtors move on with their lives.

To crack down on fraudsters, new Bankruptcy Restriction Orders" (RBOs) would put curbs on potentially fraudulent or culpable bankrupts after their discharge.

And a "can pay, should pay" approach will encourage paying off debts after bankruptcy has been discharged.

The new legislation will also provide for reforms to the way civil court orders are enforced.

These reforms include changes to the way in which a debtor's bank account is frozen, with the aim of having a "subsistence level" below which funds are protected from arrestment.