Bankruptcy, or insolvency, is a way for those seriously overwhelmed with debt to free themselves from their repayments and make a fresh start. However, bankruptcy does have some extremely serious long-term consequences, and the decision to declare oneself bankrupt should not be taken lightly.

If you are facing unmanageable debts you can be made bankrupt either voluntarily or involuntarily. If you feel you are unable to repay any of your debts, you can file for bankruptcy yourself. If your creditors are owed £750 or more and hold no hope of getting this back, they can take you to court and force you to go bankrupt in order to try and recoup some of what they are owed.

Going bankrupt frees you from your creditors and means they can no longer contact you, either by post or by phone, to try and recover their money. But while this idea may sound attractive, there are some seriously negative implications of bankruptcy.

First of all you will lose control of all of your assets, which will be shared out equally among your creditors. If you own a home your property may have to be sold in order to cover your debts. You may also be made subject to an Income Payments Order (IPO), which will divert part of your wages to your creditors.

Bankruptcy will also prevent you from running a business and holding some public offices. When you are declared bankrupt this will be announced to the public via notices in some papers, and your employer will also be made aware of your financial situation. So the public stigma of bankruptcy can be equally as damaging as the financial consequences.

Your ability to borrow will also be severely restricted following bankruptcy, which makes purchasing property and other assets extremely difficult for years afterwards. Bank current accounts may also be hard to obtain.

Bankruptcy is a serious proposition and there are alternatives that should be considered. An Individual Voluntary Arrangement (IVA) is one of these alternatives. It involves a negotiated deal between you and your creditors under which a proportion of you debt is written off entirely.

The advantage of an IVA is that it avoids bankruptcy and its associated restrictions. IVAs have become increasingly popular in recent years, especially among the indebted middle classes, since they offer a way out of debt without the stigma of bankruptcy.

However, while many financial experts say an IVA should always be considered before bankruptcy, they also say it should only be used as a last resort, since it too could have serious implications for your long term financial position.

These experts have raised concerns about the growing number of people being declared bankrupt or entering IVAs. Indeed the latest government figures show that the number of people becoming insolvent in England and Wales has risen by 55 per cent over the last 12 months.

According to James Falla from the debt solutions consultancy Thomas Charles, rising bad debt is becoming a familiar trend, which means the rise in the number of people going bankrupt is only going to continue.

"As long as borrowing beyond one's means remains the norm, we will continue to see a backlash of personal insolvencies as people become overwhelmed by debt," he said.

It is thought that the UK government's liberalisation of the UK bankruptcy regime is responsible for the increase the number of bankruptcy cases, although changing attitudes towards debt, rising household bills and a willingness on the part of banks to lend to those who cannot necessarily afford the repayments, have also been blamed.

Whatever the catalyst, it is clear that bankruptcy is becoming a real issue for many people in the UK, and getting professional help and advice should be the first step towards a debt free future.

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