The report on insolvency statistics also said the overall number of personal insolvencies during the same period fell by over 10%.

Alec Pillmoor, head of personal insolvency at Baker Tilly, commented: “The 10% fall in the number of personal insolvencies is very welcome, although I am concerned that this headline figure masks the underlying financial problems that many households continue to face.”

He continued: “These statistics do not include schemes such as debt management plans. The recent economic review suggests that real household income is at its lowest since 2005 and the unexpected fall in GDP reported last month has made many people question their job security.”

A recent survey by insolvency trade body R3 showed a hardening in British views on debtors. Nearly 60% of those surveyed thought that bankruptcy should last longer than ‘a mere year’ in order to cull the nation’s ‘reckless spending culture’.

Lee Manning, president of R3, said: “Our bankruptcy regime, lasting only a year, is quite lenient compared to other countries. While no-one is advocating a return to the ‘debtor’s prison’, there is a strong feeling that a debtor’s spending behaviour should be factored into the length of the term of bankruptcy.”

Chris Nutting, director of personal insolvency at KPMG, attributes the underlying downward trend in personal insolvency to households adapting to ‘a maturing culture of more prudent financial management and restricted access to credit’.

He said: “Nevertheless the figures give a mixed picture in terms of the methods of debt relief available with bankruptcy numbers showing a significant reduction of 27.1% and individual voluntary arrangement showing a reduction of 6.6% in stark contrast to increasing numbers of DROs which have increased by 9.6%.”

The anticipated uptake of debt relief orders (DROs) over bankruptcy in increasing, with the use of DROs as an effective method of relief as popular as bankruptcy – each having a market share of 29%.

Nutting continued: “This demonstrates the changing profile of the market, with those debtors having few assets and relatively low levels of debt choosing DROs, while those with realisable assets (whether physical assets or contributions from income) opting for bankruptcy and IVAs.

KPMG suggest that static income levels, and on-going increases in utilities, fuel and food are likely to push households into considering more formal personal insolvency options.

Over half the nation is worried about their current levels of personal debt, while 51% struggle to make it to payday each month, especially in the 35-44 age group.

This situation is also changing the attitudes of borrowers to payday loans, with 4m adults saying that they are likely to seek a payday loan in the next six months, the highest level recorded by R3.

Manning added: “Those who struggle to make ends meet, using credit cards to bridge the gap, or who are considering a payday loan, will have to make some financial sacrifices in order to avoid their debts spiralling out of control and leading to a potential bankruptcy.”