Almost 70,000 people became insolvent in 2005, with two-thirds declaring themselves bankrupt and the remainder opting for Individual Voluntary Arrangements (IVAs).
The official figures from the Department of Trade and Industry (DTI) have surprised analysts, who claim that high levels of personal debt, sluggish economic growth and changes to the regulations governing bankruptcy are to blame for the steep rise.
A total of 20,461 people entered insolvency during the last quarter of 2005, an increase of 15 per cent on the previous three months and a rise of more than 57 per cent compared with the same period of 2004.
Bankruptcies between the fourth quarter of 2004 and the last three months of 2005 rose by almost 38 per cent, while IVAs were up over the year by 117 per cent.
The Office for National Statistics (ONS) reports: "Annual figures of individual insolvencies show a steady increase since 1999. The number of voluntary arrangements has dropped since 2000 but this has been more than offset by an increase in bankruptcies."
Individual Voluntary Arrangements (IVAs) provide an alternative to bankruptcy, which can drastically affect an individualâs ability to obtain financial services in the future. IVAs offer debtors the chance to agree a monthly payment plan with creditors.