The number of people suffering from serious debt problems is much higher than official figures suggest, a survey has found.

About 600,000 people have entered debt-management plans (DMPs), according to a survey by R3, the insolvency practitioners’ body. These debt plans, which are separate from bankrupties and individual voluntary arrangements (IVAs), do not show up in official insolvency statistics.

About 80,000 people entered an IVA or became bankrupt in England and Wales in the first half of this year, according to official figures.

R3 said that DMPs were being used as a “parking lot” for thousands of debtors, keeping them “out of sight”.

A DMP allows borrowers who cannot keep up with their credit card or loan repayments to enlist the help of a middleman, such as a charity or a fee-charging company. This middleman takes a set payment from the borrower each month and divides it between the creditors. DMPs have less impact on people’s credit records than bankruptcy or IVAs.

Entering into an IVA or bankruptcy will result in debts being written off after a set time, but this is not usually the case with debt management plans, although some creditors will accept reduced payments. The debt plans can last ten years or longer.

Nick O’Reilly, president of R3, said that DMPs can suit those with manageable levels of debt, which can be repaid without entering into a formal arrangement. But, he added: “There is cause for concern that these informal arrangements have the potential to turn into a life sentence”.

The Consumer Credit Counselling Service (CCCS), the debt charity, which organised 12,500 DMPs in the first half of the year, questioned R3’s figure for the plans. Both R3 and the CCCS have called on the British Bankers’ Association to gather information from their members about the number of people on DMPs.

Malcolm Hurlston, chairman of the CCCS, said: “This would give everyone clear information about the number of people with debt issues.” He said that the number of people entering bankruptcy would be twice as high if all the people advised to take that course of action had done so. Nearly 25,000 people became bankrupt between April and June this year. “There is still a stigma about going bankrupt and the cost of going bankrupt is also a deterrent,” he said. It costs about £500 to apply for bankruptcy.

Despite the economic downturn, consumers are still racking up more credit card debt than they are repaying, according to figures out this week from the BBA. While credit card-holders repaid £7.4 billion in August — more than the £7.3 billion than they spent — it was not enough to cover all credit card fees and interest charges, which forced total credit card debt up by £400 million during the month.

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