A Fine Gael minister says a further reduction in the bankruptcy term in Ireland is "a possibility".

Labour is pushing for the new term of three years to be cut down to one, but it has been reported that the issue has caused tensions between the coalition parties.

Longford-Westmeath Deputy Willie Penrose, who is driving the proposals, is due to meet officials from the Department of Justice for talks tomorrow.

Last week, Transport Minister Paschal Donohoe said he does not believe the current three year bankruptcy needs to be changed - saying it 'strikes a good balance'.

But Justice Minister Frances Fitzgerald told the Pat Kenny Show here on Newstalk the idea needs to be discussed further.