More than 30,000 people became insolvent in England and Wales during the first three months of 2007, official figures show - a new record.
This is an increase of 23.9% on the same three-month period in 2006, the government's Insolvency Service said.
However, the rate of increase in insolvency is starting to slow.
It seems lenders are taking a tougher stance with debtors looking to enter Individual Voluntary Arrangements (IVAs), a type of insolvency.
Rejection rates
The number of people entering IVAs in the first quarter was up only 4.7% on the previous three-month period.
According to research from KPMG, more than 18% of IVAs put forward by consumers in debt trouble were rejected by lenders.
This is nearly double the rejection rate seen in the first three months of 2006.
"Creditors are taking a harder line in deciding which IVAs to accept and debt solution companies are wary of putting forward IVAs which may not meet the approval of creditors," said Steve Treharne, head of personal insolvency at KPMG.
HOW TO GO INSOLVENT
Broken down, the figures show 16,842 people went bankrupt, while 13,233 opted for an IVA.
Overall, 30,075 people became insolvent between January and the end of March, up from 29,715 during the previous three month period.
Meanwhile, the number of mortgage repossession orders in England and Wales fell slightly between the last quarter of 2006 and first three months of 2007.
Experts warn that a rise in UK interest rates, widely expected next week, could tip many more people into insolvency.
"Debt levels have been flat of late and there was no credit splurge at Christmas, hence these relatively flat insolvency figures" said Pat Boyden, insolvency expert at PriceWaterhouseCoopers.
"However, the concern is what happens when rates rise? Half a percentage point rise in rates would add £60 a month to a £150,000 repayment mortgage that could well push many people into insolvency."
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