The number of people becoming insolvent fell by 3.9 per cent in the last three months of last year, a decrease of 16.4 per cent year on year.

Figures released this morning by the insolvency service show the total number of insolvencies last year fell by 0.6 per cent from 2006. A 2.4 per cent rise in bankruptcies was more than outweighed by the fall in the number of people entering into Individual Voluntary Arrangements (IVAs).

The number of bankruptcies being sought by people in debt now outnumbers those being demanded by creditors by four to one. In 1998, 53 per cent of bankruptcies were sought by debtors, last year that figure rose to 84 per cent.

Some 15,659 people were declared bankrupt between October and December last year, down 1.1 per cent on the previous quarter and down 8.3 per cent on the last quarter of 2006.

A further 9,188 people were granted an IVA. This was a fall of 8.3 per cent on the previous quarter and a decrease of nearly 30 per cent compared to the same quarter in 2006. The number of IVAs, which allow debtors to pay off just a portion of their debts, fell sharply after banks refused to accept many IVA applications saying that IVA firms were offering payments which were too small and taking high fees for themselves.

This dispute was settled earlier in the week, so experts expect the number of IVAs to soar in coming months. Mike Gerrard, Head of Personal Insolvency at Grant Thornton, said: "Take no heart from this quarter's drop in personal insolvencies, they are merely the tip of the iceberg. From here on in it's going to be a rough ride for many individuals and the numbers going insolvent will rise.

The number of corporate insolvencies rose 0.3 per cent compared to the previous quarter, but fell 2.1 per cent year on year. The total number of liquidations throughout last year fell by 5.4 per cent to 12,426.

The number of compulsory liquidations fell by 7.2 per cent in the last quarter, and 17 per cent year on year, while the number of voluntary liquidations fell rose by 5.4 per cent in the quarter and 9.5 per cent year on year.

But experts said that the dip in corporate insolvencies was likely to be short-lived. Malcolm Shierson, a partner at Grant Thornton, the accountant, said: "We now expect the number of corporate insolvencies to increase by 10-15 per cent in 2008, as many of the credit arrangements offering life support to ailing companies have almost disappeared. It is increasingly unlikely that there will be a quick return to business as usual."

A survey released yesterday by Ernst & Young, the revealed the growing pressure on UK businesses. The report showed that profit warnings from UK quoted companies rose dramatically in Q4 2007 to reach the highest quarterly and yearly levels since 2001, with almost one in five who warned blaming the impact of the credit crunch.