Debt experts have warned that while bankruptcies can be discharged in a quicker period than before, many of the associated restrictions to credit are still in place.
Instead, IVAs, which are used to repay debts without the risks to credit involved with bankruptcy, are being encouraged.
“We are urging people to get professional debt counselling on their situation before making a firm decision,” said John Porter, a senior counsellor with The Debt Counsellors.
“The Individual Voluntary Arrangement is a potential way to avoid bankruptcy and a debt counsellor will be able to give advice on whether it is viable in an individual case.”
His advice comes as statistics show that bankruptcies rose by 38 per cent last year and 10,000 cases are expected for this year.
However, Mr Potter believes that many bankrupts would be better served by taking out an IVA, allowing them to work their way out of debt without the adverse effects of bankruptcy.