The number of people going bankrupt has soared to its highest level since records began in the 1960s, Government figures showed today.
More than 12,000 people in England and Wales were declared bankrupt during the three months to the end of September, nearly a third more than during the same period of the previous year, according to the Department of Trade and Industry.
At the same time the number of people taking out Individual Voluntary Arrangements, under which interest on credit is frozen in exchange for a set amount being repaid each month, nearly doubled to 5,500.
Overall, the total number of individual insolvencies was 46 per cent higher than a year ago.
The rising record level of bankruptcies reflects the increasing problems consumers are having keeping up with their debts, which have risen to more than £1 trillion.
Today's figures follow data published last week that showed the number of repossession orders on homes in England and Wales had soared by 66 per cent during the third quarter.
Bankruptcies have risen steeply since 2004 when the Government introduced new laws reducing the term from three years to one, although numbers were already rising before this.
Critics have complained that the new system makes bankruptcy an easy option for people struggling with debts and has reduced the social stigma attached to it.
But Desmond Flynn, inspector general and agency chief executive of the Insolvency Service, said: "The very dramatic increase in the number of IVAs shows that record numbers of people are trying to deal with their financial difficulties without recourse to bankruptcy.
"They know that bankruptcy is not an easy option and that if bankrupts can pay towards their debts, they will pay.
"Discharge from bankruptcy now happens after one year and not three, but bankrupts are now liable to make contributions from their income for three years. Bankrupts have agreed to pay some £9 million this year towards their debts."
Debt charity the Consumer Credit Counselling Service warned that there could be an even steeper rise in the number of people going bankrupt if everybody who was recommended to go down that route did so.
It said bankruptcy was proposed as one of the options to nearly half of the 1,000 people it counselled each week, and if everyone decided to go bankrupt the figures could soar by more than 24,000 a year.
But it added that many people were still against it because of the social stigma, fear they could lose their house or job, or because they wanted to pay back the money they had borrowed. In some cases people could also not afford to pay the fee for bankruptcy.
The DTI figures also showed there had been a 14 per cent rise in company liquidations, with 3,389 firms going under during the third quarter.
Of these 1,531 were compulsory liquidations, a third more than last year, while the rest were voluntary liquidations.Reuse content