Kerry Katona has been warned she will be decalred bankrupt unless she pays a huge tax in the next 30 days.

The former Atomic Kitten singer has angered tax officials by failing to pay an installment on time – and has now been served with legal papers.

A source tells The People, "It's reaching crisis point - unless she acts quickly she will be declared bankrupt.

"The papers basically say pay up in 30 days or you will be declared bankrupt."

However, according to the source, Kerry is still enjoying a lavish lifestyle despite having to find £380,000 to go towards a £1.2 million tax bill.

“She's forking out for cars and a flash lifestyle, yet thinking she shouldn't pay taxes like the rest of us," they say.

“She is useless with money. She has no concept of saving and spends whatever she feels like. It's not on - she needs to get real."

However, Kerry’s own spokesperson says, “She has buried her head in the past over this. She has paid out £250,000 in unpaid tax and now intends to make a further two payments before the deadline."