The government is to put the brakes on the bankruptcy boom by clamping down on controversial daytime television and radio adverts that promise viewers they can walk free from 80% or more of their debts using an individual voluntary arrangement (IVA).

The Office of Fair Trading will order a large number of firms selling IVAs to review their advertising amid concerns that consumers are being misled by marketing claims. An OFT spokesman said: "We are concerned that there may be some companies which are overstating the benefits of IVAs, for example, saying that you can write off 90% or so of your debts."

The average debt write-off achieved by IVA firms is about 55%, and in many cases they are able to write off less than a third of someone's debts.

The OFT warned that firms whose advertising was "non-compliant" could have their consumer credit licences revoked, in effect forcing them out of business.

The number of IVAs doubled to 45,000 in 2006 and is forecast to top 100,000 this year. Concern over their growth has led the Department of Trade and Industry to call an IVA summit today to examine whether the sector needs greater regulation. Officials are concerned at the "wall-to-wall" advertising of IVAs on daytime television and the distorted message that the public is receiving. There is also growing unease over the level of fees earned by IVA firms, typically £9,000 a case.

The typical person taking out an IVA has debts of £40,000-£43,000 and is a male in his 40s. On average the IVA cuts the debt to £24,000, repaid monthly over five years. But the banks and credit card companies receive only two-thirds of that amount - the rest goes in fees to the IVA firms, explaining why so many IVA firms have been launched and why they are prepared to spend so much on advertising.

Debt Free Direct, the UK's biggest IVA firm with a market share close to 20%, said it was "delighted" at the OFT's action. Derek Oakley, insolvency director, said: "We've been calling for this for some time. We see adverts all the time that say you can write off 75%, 80% or even 90% of your debts. You clearly cannot: it's technically inaccurate and sets the wrong level of expectation in people's minds.

"People have to remember that under an IVA they have to pay what they can afford, not ... what they think they can get away with. If you can afford 50p in the pound, then that's what you have to pay."

Debt Free Direct has passed a dossier of complaints to the Advertising Standards Authority alleging that rival firms' exaggerated claims have breached rules. Accuma, Spectrum and W3 Debt Solutions were among the companies named.

But Accuma's chief executive, Charles Howson, defended advertising that tells consumers they can avoid "up to" 75% of their debts. He said: "Our average IVA returns 42p in the pound to creditors, so clients are seeing around 58% of their debt written off. But there is a huge range and while some people may see only 26% of their debt written off, some really are seeing 75% of their debts written off."

He said his firm, the third largest IVA player, turned away 96 out of every 100 callers as unsuitable for an IVA. "There is a lot of criticism about IVAs being mis-sold but we always clearly warn customers about their alternatives and the impact that an IVA has on your credit rating."

Critics say today's government action is in part to deflect criticism that bankruptcy has been made too easy and that people are using IVAs to dodge their debts when they could still afford to repay them.

A DTI spokesman said it was a "total myth" that IVAs had become easier since the 2002 Enterprise Act. This cut the automatic discharge period for bankruptcy to as little as one year but did nothing to ease the rules about IVAs, which date back to the 1986 Insolvency Act.

FAQ IVAs

What is an IVA?

IVAs were set up in 1986 as a halfway house for sole-trader businesses to avoid bankruptcy. An IVA looks at income compared with necessary expenditure. Creditors agree to freeze the debt - typically at around 40p-50p in the pound, which the debtor then repays over a fixed period, usually five years.

How does it work?

An insolvency practitioner determines how much the debtor can afford to repay, and once a minimum of 75% of creditors agree it becomes a binding agreement.

How does it differ from bankruptcy?

In a bankruptcy, the debtor's assets are sold off and the person loses control of their assets, whereas an IVA allows debtors to keep their homes.