More Brits are taking out Individual Voluntary Agreement (IVAs) to declare themselves insolvent as a way to escape their growing level of personal debt.

Some 60,000 people in the UK declared themselves insolvent in 2005 as debt levels on personal loans, credit cards and overdrafts reached £1 trillion in 2005, according to PricewaterhouseCoopers.

The average IVA debtor owed some £60,000 with creditors expected to recover only 38 per cent of the total, figures from KPMG show.

Analysts believe that more people are turning to IVAs as a way to settle their debts without having to go bankrupt. These involve negotiating with creditors in order to condense debts into a monthly affordable repayment.

John Bangham, director of personal insolvency at KPMG's Cardiff office told the Western Mail: "The IVA is an increasingly popular way forward for many people in financial difficulty as it offers them an opportunity to face up to their problems, draw a line in the sand and restructure their finances.

"Creditors, in the right circumstances, also prefer this as a way forward, as they see a significantly greater return on their money than they would do from bankruptcy. Yet we still expect to see a large proportion of the over-indebted decide that bankruptcy is the best option for them."

But some consumers prefer to take out debt consolidation loans to pay back money owed to creditors. But experts say people considering such a loan should think carefully before signing up as these are secured against the debtor's property.