Declaring bankruptcy will result in a "black mark" on your credit rating and should only carried out as a last resort, though it can be the best option in some circumstances, a money education charity has advised.

Credit Action says that for those in extreme debt, declaring themselves bankrupt is "the right thing to do" and can be sensible for those with no other choice but to start over again.

Chris Tapp, Credit Action deputy director, believes that there isn't the "stigma" attached to bankruptcy when signing up for an Individual Voluntary Agreement (IVA) or a debt management plan.

He explained: "It's a real indicator that the person is making a real effort to sort out their finances, but at the same time pay back what they owe."

However, Mr Tapp said bankruptcy is viewed differently by society to IVAs or debt plans.

"People do still make an instantaneous judgement on somebody if they know they've gone bankrupt that somehow they might have been irresponsible with their money or they're not very good at looking after their affairs," he concluded.

In 2005 there were a total of 67,850 bankruptcies in the UK, according to figures from Debt Counsellors.


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