The number of people being declared insolvent was at is lowest level for a decade in 2015, but debt problems started to pick-up late in the year.
A total of 79,965 people were left with unmanageable debts last year, down 19% on 2014, official figures from the Insolvency Service show.
This was the fifth successive decrease in the annual total.
Despite the annual fall, the figures show a rise in personal insolvencies in the final three months of the year.
The total grew to 20,404, a 3.6% increase on the previous quarter, and the second quarter-on-quarter rise in a row. However, this was 10.5% lower than the same quarter in 2014.
Bankruptcy and alternatives
Bankruptcy: The traditional way of escaping overwhelming debt. Ends after one year, but you are likely to lose all your assets, including your house, to pay something to the creditors
Individual Voluntary Arrangement (IVA): A deal between you and your creditors, overseen by an insolvency practitioner. Less stigma, less chance of losing your home, but involves paying some of your debts in one go.
Debt Relief Orders: Introduced in April 2009, these allow people with debts of less than £15,000 (£20,000 since October 2015) and minimal assets to write off debts without a full-blown bankruptcy
An estimated total of 14,629 companies entered into insolvency in 2015, which was 10% lower than the total in 2014 and the lowest annual total since 1989.
The number of companies that faced a compulsory winding up order in 2015 was at its lowest level for 34 years.
Analysts say companies are dealing with debt earlier and banks are seeing little value in shutting them down for unpaid debts.
Andrew Tate, vice-president of insolvency professionals trade body R3, said: "There has been a general trend of companies looking to turn things around before reaching a position where they need to enter a formal insolvency process.
"Creditor forbearance is playing a part too: banks, in particular, are much more willing to work with companies in financial trouble than they were in the early 90s.
"Compulsory liquidation is often seen as less dynamic process, which is less likely to lead to a rescue of the business than other insolvency procedures. It is generally used by creditors as a last resort when a company doesn't pay.
"Finally, the 'zombie business' phenomenon could play a role. 'Zombie businesses' are those that can service the interest on their debts but not the debt itself; they can keep going but have little short-term prospect of turning things around. Numbers of companies in this position have fallen recently, but they have acted as a drag on insolvency numbers since the recession."
Ian Gould, business restructuring partner at BDO, said: "We see creditors increasingly viewing compulsory liquidation as a risky tool for recovery, given the additional costs it incurs and the fact that the process typically ends with a liquidation which, historically, offers little returns for creditors."