Although declaring yourself bankrupt is a way of resolving your debt issues, it should be avoided if at all possible. Bankruptcy has many disadvantages and penalties and as a result it should not be entered into lightly. Aside from the obvious stigmas and disqualifications, it can affect your ability to obtain any sort of credit for a number of years, even after you have been discharged.

In 2004, the bankruptcy laws in the UK changed in a way that made it easier for people to file for bankruptcy. They did this by reducing the discharge period from three years to one year.

As a result of this and other factors, bankruptcy rates have been growing at an alarming rate over recent years. In 2004, nearly 36,000 people filed for bankruptcy. By 2005, this figure had risen to a staggering 70,000- nearly double the previous year's figures.

However, bankruptcy is not the only option for those in debt and it can be avoided. Going bankrupt can affect your employment prospects, your ability to run your own business and it can mean that you lose your house.

In addition to this, bankruptcy means surrendering the majority of your belongings and salary to receivers. This can be very stressful and upsetting as well as financially disadvantageous.

If you are in serious debt but want to avoid bankruptcy an IVA could be an alternative for you. This is a formal agreement between a debtor and creditors by which a proportion of the total debt is repaid over 5 years.

Repayment amounts are based on what the debtor can afford to pay and are made monthly. Whilst the IVA is in place, creditors are not allowed to contact the debtor. Furthermore interest on the debt is frozen and a portion of the debt is written off altogether. It is not uncommon for as much as 85% of a debt to be written off with an IVA.

IVAs were introduced by the government in 1986 as a way of helping people to avoid bankruptcy. Since their introduction they have become increasingly popular and are seen as a very favourable alternative to bankruptcy.