The number of people going bankrupt hit a record high in the last three months of 2004, figures from the Department of Trade and Industry have shown.
Rate rises have failed to cool the UK's appetite for spending
Individual bankruptcies were up 34.6% on the same period last year and 8% on the previous quarter, suggesting higher interest rates are beginning to bite.
On a seasonally adjusted basis, 13,013 individual insolvencies were recorded between October and December.
But company liquidations fell 0.9% to 2,2938, down 11.1% year-on-year.
Of those people in England and Wales unable to pay their debts in the last three months of 2004, 9,803 cases were bankruptcies and 3,120 Individual Voluntary Arrangements (IVAs) - which allow debtors to come to an agreement with their creditors.
"The fact that the number of individual insolvencies rose significantly through 2004 ... indicates that higher interest rates have increasingly pushed heavily indebted people over the edge," Global Insight economist Howard Archer said.
The Bank of England has raised rates five times since November 2003, from historic lows of 3.5% to the current 4.75%.
But as the Bank has increased rates in an effort to cool consumer spending, overall consumer debt has soared past the £1 trillion mark.
The latest figures from the Bank itself show consumer credit and mortgage borrowing growth accelerated in December.
Mr Archer warned that the Bank should carefully consider the risks to the economy before pushing rates any higher.
"The record high level of consumer debt suggests that a number of people have borrowed to their limits and are vulnerable to even a modest rise in interest rates," he added.