The number of people going bankrupt has soared to its highest level since records began in the 1960s, raising fears that consumers are increasingly failing to cope with Britain's £1 trillion personal debt burden.

More than 12,000 people in England and Wales were declared bankrupt during the three months to the end of September, the Department of Trade and Industry revealed today. That is nearly one-third more than during the same period of the previous year.

Overall, the total number of individual insolvencies rose 46 per cent from a year ago to reach a record 17,562. Bankruptcies were also at a record, up 30.9 per cent year-on-year to reach 12,043.

The number of people filing for bankruptcy has risen sharply since April 2004, when the Government reduced the time limit before bankrupts could be discharged, from three years to one. This has led to accusations that the new system makes formal bankruptcy an easy, stigma-free option for people struggling to repay debts.

The Government plans to further simplify personal insolvency and is considering new rules whereby people with debts of less than £15,000 could have them written off.

"These figures are only going to get worse in the UK," said Steve Treharne, head of personal insolvency at KPMG. "Not only do we have a continuing consumer debt crisis and significantly greater leniency around reduced discharge terms ... but we could also see a number of new streamlined procedures if current proposals are implemented."

The average bankruptcy term in the UK is now just eight months, with 51 per cent of bankrupts discharged in less than a year.

The DTI defended the bankruptcy system by highlighting a near doubling in the number of people taking out Individual Voluntary Arrangements. Some 5,500 people took out such contracts in the third quarter, allowing them to freeze intrerest on credit in return for a set amount being repaid each month.

Desmond Flynn, inspector general and agency chief executive of the Insolvency Service, said: "The very dramatic increase in the number of IVAs shows that record numbers of people are trying to deal with their financial difficulties without recourse to bankruptcy.

"They know that bankruptcy is not an easy option and that if bankrupts can pay towards their debts, they will pay."

Vince Cable, the Liberal Democrats' economics spokesman, called for the Government to tighten laws on personal lending and offer more support to debtors.

"There is currently a considerable degree of irresponsible lending and aggressive marketing to individuals which leads to people taking on more debt. Lenders have an obligation to stop these practices and to provide greater levels of debt advice," he said.

"The Government should be actively working with the financial services industry to achieve a national roll-out of independent advice centres, providing people with early access to financial health checks before they get into a crisis situation."

The number of companies going bust also rose, the DTI revealed today.

In the third quarter, 3,389 firms in England & Wales went into liquidation. That was a 14 per cent increase than during the same period last year.

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