The newspaper said Fergie's debts have piled up to the tune of 5 million pounds ($7.9 million) and that at least one palace financial adviser has concluded that filing for bankruptcy may be the only way out.
Despite the embarrassment of being the first senior royal to ever seek debt relief, the rationale is that a quick filing would head off an even bigger mess down the road.
"One key adviser believes the right thing is for the Duchess of York to go bankrupt," a palace source told the Telegraph. "He says it will be a weeklong wonder then everyone …will forget about it."
The duchess's financial woes became a public scandal earlier this year when she was busted in a television sting offering access to her ex-husband, Prince Andrew, for a fee.
Notable deaths of 2014 [PHOTOS]