People struggling with debt should only consider an individual voluntary arrangement as a last resort, a consumer group warned today.

Which? said IVAs were not the easy option they were portrayed as being.

Under an IVA creditors agree to freeze interest on debts in exchange for a set amount being repaid each month, usually for a period of around five years.

Which? said most of the companies offering to arrange IVAs had sprung up in the past couple of years to advise the growing numbers of people unable to keep up with their debts.

In 2006 more than 120,000 people were declared bankrupt or took out an IVA, a 50 per cent jump on the previous year.

But the group warned that while the television adverts for IVAs - which often promise to reduce debt dramatically, sometimes by 80 per cent or more - may make them look tempting, the companies arranging them were under no obligation to give the best advice.

It added as commercial organisations, they were unlikely to recommend a deal with no fees or charges. The group said fees alone on an IVA could add up to as much as £7,000, and for many people the arrangements included crippling levels of repayments. IVAs are also a

form of insolvency and can make it difficult for people to borrow money in future.

Which? urged people who found themselves in financial difficulties to approach instead charities such as Citizens Advice or National Debtline which are largely Government funded and, as independent organisations, are far more likely to give impartial advice.

Phillip Inman, author of the Which? guide Managing Your Debt, said: "Many people opt for an IVA as they see it as a way to escape debts, yet an IVA can give false hope and lead into bankruptcy. Think carefully before doing business with an IVA company. There are far better options if you're in debt."