The Duchess of York is doing "everything she can" to avoid bankruptcy, her spokesman said today.

It is believed that the Duchess owes around £2 million relating to her business concerns.

But while voluntary bankruptcy is still an option, a spokesman said the situation is "being managed" and that all her personal debt had been paid off.

A report in The Sunday Telegraph today suggested that the Duchess owed £5 million in both personal and business debt.

The newspaper suggested that the state of her finances had caused the Queen to be "deeply concerned", according to their sources.

But the figure used by the newspaper was today dismissed as "significantly" exaggerated.

Sources have have suggested that actual total owed is closer to the £2 million mark.

Sarah Ferguson went public with her financial problems in May after being caught in a cash-for-access scandal.

She was filmed accepting money from a News Of The World reporter, posing as a business tycoon, in exchange for an introduction to her ex-husband, the Duke of York.

During a subsequent interview with US chat show queen Oprah Winfrey, the former royal owned up to being "substantially" in debt, but would not say by how much.

The Sunday Telegraph reported today that at least one key Royal adviser believed that bankruptcy is now the best option.

But the Duchess appears determined for this not to happen.

A spokesman said today: "She is doing everything she can to avoid bankruptcy."

He added: "The figures in the press have been exaggerated. The situation is being managed.

"The only debts she has are business debts, some of which are disputed. All her personal debts have been paid.

"There is a number of options open to the Duchess of which bankruptcy is one.

"But it would be premature to say she is going into bankruptcy as the situation is being managed."