According to Chris Tapp, deputy director of Credit Action, those considering filing for bankruptcy or an individual voluntary arrangement (IVA) after becoming unable to make credit card and loan repayments should be conscious that their credit history is likely to be adversely affected. This in turn could hamper their access to competitively-priced borrowing in the future. As a result, he reported that by drawing up and sticking to a debt management scheme with their creditors, rather than insolvency, Britons may find that their credit rating is not damaged as much.

He said: "There's no real penalty when it comes to doing a debt management plan. Obviously it does appear on your credit rating but it's not a form of insolvency, so it's not a black mark. It's a real indicator that the person is making a real effort to sort out their finances, but at the same time pay back what they owe".

"With the penalties of bankruptcy staying on your record for six years and making it much harder for you to get credit in the future, depending on what kind of industry you're in, it can have an impact on your employment"

However, those choosing a debt management plan could see their creditor accepting reduced repayments, which consequently "means that your monthly payments are affordable. You only pay what you can afford to pay". He added that there is still a stigma attached to bankruptcy, with consumers having a fear that by declaring themselves in this position that people will "make an instantaneous judgement" and view them as being irresponsible with their money or "not very good at looking after their affairs". IVAs, comparatively, are said to have less of a stigma attached to them, with this falling even further for those on debt management plans.

Consequently, he suggested that bankruptcy "is really the option of last resort", although it could be helpful for those consumers in a position where they will never be able to pay back their debts.

Meanwhile, figures from the financial charity showed that Britain's total personal debt was at 1,354 billion pounds as of the end of June - an increase of 10.2 per cent, or 107 billion pounds, from the same time 12 months ago. Research from Credit Action also indicated that secured lending grew by 9.6 billion pounds during the month, with consumer credit borrowing showing growth of 0.9 billion pounds.

Those concerned about the level of money owed to various creditors may wish to opt for a debt consolidation loan to reduce all their debts into one single monthly payment. Earlier this month, findings from MoneyExpert showed that just under 2.5 million Britons are currently "very concerned" about how much they are in the red. And despite increasing numbers of consumers looking into getting a consolidation loan, one in four of those already in debt were revealed to have furthered how much they were in arrears over the last three months.