An IVA is not suitable for everyone. A debt management plan or bankruptcy may be more appropriate.

People who choose bankruptcy tend to earn a low, irregular or no income, own no major assets such as property, work in careers that do not involve cash and have no way of committing to regularly making monthly repayments to creditors.

The average person that applies for bankruptcy will be in their thirties, but there is a growing number of people in their fifties and sixties that have experienced a major life change, such as illness or divorce, who are applying.

Contrary to popular belief, a person does not have to be in thousands of pounds of debt to become bankrupt. An unsecured creditor can apply to make an individual bankrupt if they are owed just £750, while anybody can apply to declare themselves bankrupt. You will have to pay £310 towards the cost of the administration of your bankruptcy by the official receiver. Court fees on top of that are usually £140.

Under bankruptcy, the debtor no longer has control over any assets. An official receiver will be appointed to deal with creditors, informing them of how much money will be shared from the bankruptcy. The receiver will then dispose of any suitable assets, such as property or cars, to pay off the creditors. Individuals are allowed to keep their car if it vital for their work.

For that reason, debt charities are recommending it to people who don't own any major assets. However, if a bankrupt person has dependants it is possible to delay the sale of a property for 12 months to find alternative accommodation. Or if they own part of a property, their spouse, family or friend may be able to purchase that part of the property from the receiver.

After a period, usually one year, debts are written off. However, the bankruptcy notice stays on their credit report for a further six years, making it difficult to obtain credit. If you come into any money while the bankruptcy order is still in place, this could also be taken away - if you win the lottery, for example.

Bankrupts are barred from some occupations, including most positions in financial and legal services, the police and armed force, and people working in those fields should consider alternatives. Bankrupts are also barred from being a company director.

Once a debtor has been discharged from bankruptcy, they are no longer liable for any outstanding debts, as long as they were detailed in the bankruptcy proceedings.

Entering into an IVA or becoming bankrupt should be measures used as the last resort by someone with financial problems The key is to get individual advice. If you have no assets and no income then bankruptcy is probably the best option. But if you are in a professional career you may lose your livelihood by going bankrupt – solicitors and accountants, for instance, will be struck off. So an IVA may be a better option.