The number of people being declared insolvent is up by a third on the same time last year.
In the 10 months to October 3938 people were either bankrupted, or entered the new No Asset Procedure regime which wipes their slate clean if they have debts of no more than $40,000.
In the same period last year 2963 people were declared bankrupt.
The No Asset Procedure option became available in December, so the figures to October 2007 are for bankruptcies alone.
NAP was introduced as a less punitive option than bankruptcy for those in financial difficulties and is aimed at people who have consumer debt. It lasts for a year, and under it the debtor must have no realisable assets, a maximum of $40,000 debt, and have not been previously bankrupted or used NAP.
Once NAP came in the number of bankruptcies dropped significantly, but overall the numbers of debtors being declared insolvent has shot up.
In the four months to October, the start of the Insolvency and Trustee Service's financial year, 1749 individuals were bankrupted or went NAP.
This compares with 1195 who were bankrupted in the same period last year - a rise of 46 per cent.
Insolvency and Trustee Service manager Ross Van Der Schyff believed the numbers were an indication of the slowdown in the economy.
He said there had been a "perfect storm" convergence of factors, in that the economy had deteriorated and NAP had come in at the same time. So it was hard to tell whether part of the rise was due to the new regime being popular.
Raewyn Fox, CEO of the Federation of Family Budgeting Services, said her offices were seeing a lot of people who'd heard about NAP and wanted help filling out the forms.
"So they're not coming to us for advice or for help in looking at all their options, which is what we do."
She said even if the eventual outcome was NAP, budget advisers wanted to work through an education process with debtors so that they didn't get themselves into the same situation again. "That's the [missing step]."
But Fox said although some of her clients might see NAP as a "Get Out of Jail Free" card, the Insolvency and Trustee Service had good procedures for weeding people out.
Van Der Schyff said around 25 per cent of applications for NAP were turned down. The service had put a lot of work into making sure the right people were accepted for the regime.
"It's not a bad system. Provided it pegs the right type of debtor, it works."
The main reasons for rejecting applications were that the debtor:
* Owed more than $40,000.
* Had not provided enough information.
* Had realisable assets or some means of repaying.
* Had been bankrupted before.
* May have committed an offence.
* Had racked up the debt knowing they couldn't pay.
The service had also terminated 31 NAPs before the year was up - again mainly because it emerged the person owed more than $40,000 or had assets, or because there was evidence of offending.
He said 72 per cent of people going for NAP earned less than $25,000 a year.
OUT OF THEIR DEPTH
* 3938 people were declared insolvent between January and October.
* This compares with 2963 people bankrupted to October 2007, a 33 per cent rise.
* In the last four months the numbers of insolvencies rose 46 per cent on the same period last year.