Nearly 70,000 people became insolvent in 2005, the highest since records began, the Department of Trade and Industry (DTI) has said.
More people are choosing to declare themselves bankrupt
There were a record 20,461 insolvencies in England & Wales during the final quarter of 2005, a 57% annual rise.
Experts blame the rise in insolvencies on greater personal debt, slow growth and bankruptcy rule changes.
About two-thirds declared themselves bankrupt, the rest took out Individual Voluntary Arrangements (IVAs).
IVAs are an alternative to bankruptcy which allows debtors to come to an agreement with their creditors.
Under IVAs debtors agree to repay a set amount each month in return for the freezing of interest charges.
At the same time, the Department for Constitutional Affairs (DCA) revealed that home repossession orders also rose sharply in the final quarter of 2005.
Repossession orders have been on the increase since early 2004.
The figures show the total number of homeowners being taken to court during the final three months of 2005 by lenders pursuing mortgage debt rose 50% year on year to 31,018.
Subsequently, 18,784 mortgage repossession court orders were made, 51% of which were suspended.
The DCA's figures will add to concerns about debt and the housing market.
In total, 13,501 people were officially declared bankrupt during the final quarter of 2005, up 10.9% on the previous quarter and 37.6% year-on-year.
Accountancy and consultancy firm KPMG pointed the finger at the UK credit boom of recent years for rising bankruptcies.
"The levels and availability of credit have been increasing for some time and recent figures from the Bank of England show that this trend is continuing," Steve Treharne, head of personal insolvency at KPMG, said.
"The more people incur credit, it is inevitable that this will be followed by increases in personal insolvencies," he added.
The number of companies going bust is also on the rise.
In the third quarter of this year 3,187 firms in England & Wales went into liquidation.
That was 8.5% more than during the same period last year.
Experts have argued that recent changes to bankruptcy laws have made people more willing to choose bankruptcy as a way of sorting out their finances.
Before April 2004, anyone who was declared bankrupt typically had to wait at least three years before they could be discharged.
That time limit was reduced to just one year by the Enterprise Act (2002).
Groups representing debt collectors have previously described the new bankruptcy rules as a "softer option."
But the government's Insolvency Service said that it had evidence that there was no link between the new bankruptcy laws and the rise in insolvency.
A recent independent academic survey suggested it was the availability of credit, unemployment and life changing events such as divorce or ill health which contributed to insolvency, the service said.
Pat Boyden, partner at accountancy firm PriceWaterhouseCoopers, told BBC News that many people saw bankruptcy as carrying less stigma than in the past.
"People are picking up on personal insolvency as a way out of debt...it is now easier, more accessible and there is greater awareness," Mr Boyden said.
"But bankruptcy is not a soft option, you can lose your home and struggle to get a bank account in future," he added.
Mr Boyden predicted that if current trends continued personal insolvencies could reach 100,000 in 2006.