A record number of people could be declared bankrupt or insolvent in 2008, it has been warned.

Accountants KPMG said a combination of tighter lending rules and a massive spending over the Christmas period could mean over 130,000 borrowers are likely to enter into Individual Voluntary Arrangements (IVAs) or be declared bankrupt in the New Year.

That would see a rise of 19 per cent this year in England and Wales, as figures were expected to be just under 110,000.

KPMG said its research showed around 43,000 people used the IVA route to write off a portion of their debts in 2007.

Another 67,000 people were declared bankrupt during the year, increasing the total number of personal insolvencies to the highest ever level.

The firm's research showed the average IVA debtor owed £50,300, with more than 2,500 people owing more than £100,000.

Mark Sands, KPMG's personal insolvency director, said: "This high average level of debt clearly indicates that too many people have borrowings that they have no realistic hope of repaying.

"Any excessive spending over Christmas and at the New Year sales, especially where goods are paid for on credit, risks tipping even more consumers over the edge.

"The credit crunch is resulting in increased rejections of credit card applications and a reduction in the availability of loans secured by a second charge on the family home.

"Those in difficulty will find that their options are becoming limited - formal insolvency will for many be the only way out."

This year, £1.3 billion of bad debts were written off by creditors because of people taking the IVA route, compared to £1.4 billion in 2006.


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