As unemployment and debt problems have worsened this year, the number of people struggling with their debt management has risen dramatically – reflected in the latest insolvency figures released today.

Personal insolvencies in England and Wales were up by 28.3 per cent over the last twelve months according to figures from the Insolvency Service.

During the third quarter of 2009, the number of people becoming insolvent leapt to 35,242, a 28.2 per cent increase on the same period of last year and an increase of 6.6% on the previous three months.

This figure is compiled of 18,347 bankruptcies, 12,390 people entering individual voluntary arrangements (IVAs), and 4,505 people taking out the government’s new solution aimed at those with fewer assets and minimum incomes – debt relief orders (DROs).

The number of IVAs – where borrowers arrange to pay off a proportion of their debt over a set period of time – leapt by 20.9% over the year, despite indications that creditors have become less willing to sign up to them.

Ivan Cooper, Chairman at debt advice experts Chiltern, said: “The number of IVAs has risen by over 20% in the past year, despite indications that creditors are less willing to agree to them, which suggests that many more people are suffering with their debt management problems.

“In all cases, we would recommend seeking impartial advice from a reputable organisation, like Chiltern, as expert debt help can usually prevent problems from worsening and can often help to avoid bankruptcy.”

Overview on types of insolvency

Bankruptcy: is the traditional way of escaping overwhelming debts, but carries social stigma and may affect you for a long time after completion. Bankruptcy usually ends after one year, but you are most likely to lose all of your assets (including your house and car) to pay something towards the people you owe to.

Individual Voluntary Arrangements (IVAs): A deal between you and your creditors, requiring debt and IVA advice from a qualified insolvency practitioner. With an IVA there is less stigma, and less chance of losing your home. IVAs involve paying some of your debts over a fixed period of time – usually within five years – after which time all remaining unsecured debts are written off.

Debt Relief Orders: Introduced in April 2009, these allow consumers with debts of less than £15,000 and minimal assets or surplus income to write off debts without a full-blown bankruptcy. The criteria for these is quite strict and they are aimed at people with a disposable income below £50 per month, and where the person owing money has no assets over £300 (or a motor car of less than £1,000).

Other, ways to repay debts include informal Debt Management Plans (DMPs), which can help to avoid bankruptcy whilst still repaying debts (but at a more affordable rate) amongst others.