Families who find themselves nearing insolvency following their Christmas spending need to take action quickly, an expert has explained.

The Daily Telegraph has warned that ignoring debt is not a solution and those struggling to meet priority payments such as their mortgage or rent should speak to their lender as soon as possible to see if they can be offered help such as a payment holiday.

It highlighted figures released from Grant Thornton which suggest 10,000 people a month will become insolvent during 2008.

One option open to debtors facing bankruptcy is an individual voluntary arrangement (IVA).

Such agreements offer an alternative to bankruptcy and allow the debtor to retain possession of important assets such as the family home.

IVAs ensure the borrower becomes debt free within a set period of time – usually five years – and any remaining debt is then written off.

Creditors can then receive tax breaks to make up for any losses incurred.