Christians Against Poverty (CAP) is calling for changes to the debt help on offer so that more people can qualify.
The charity says the "difficult" eligibility criteria for Debt Relief Orders (DRO) is leaving many people in debt with little option but to file for bankruptcy, which is far more expensive and carries much more stigma.
It wants the process to be simplified so that more people can obtain a DRO instead of having to file for bankruptcy.
"DROs are more affordable, take less time and there's less stigma attached, compared to bankruptcy," CAP's Social Policy Manager, Rachel Gregory, explained.
"They are designed for people on low incomes who have no other option to get out of debt. To apply for a DRO costs £90 but a bankruptcy application is £680. This is money people in debt do not have.
"Over half of our clients who enter bankruptcy are the target demographic for a DRO, this highlights why change is desperately needed as soon as possible.
"They should be allowed to go through a DRO but can't because of the difficult eligibility criteria."
CAP also wants the debt limit raised from £20,000 to £50,000.
The call comes in response to proposals from the Department for Business, Energy and Industrial Strategy (BEIS) and the Insolvency Service to increase the debt limit to £30,000.
Gregory said the proposal was a "positive step in the right direction" but that the changes "do not go far enough" as they would still exclude thousands of people who could otherwise be eligible.
"Changing the debt limit from £20,000 to £50,000 will allow 90% of CAP clients, who're wrongly excluded from a DRO, to be able to apply for one," she said.
"So many people will need to access a DRO because of pandemic debts, it's vital we simplify the solution so they can do this and start to rebuild their lives.
"It would also be beneficial for creditors. They wouldn't have to waste resources trying to collect debts that cannot be repaid. Many would also save money by avoiding unnecessary investigations undertaken in the bankruptcy process."