A record number are heading for bankruptcy in the New Year after racking up huge liabilities over the festive period.

According to accountants KPMG, 130,000 people will either be declared bankrupt or take out individual voluntary arrangements, which allow people to repay banks and credit card firms a portion of their debts then start again with a clean slate.

In 2007 the comparable figure was just under 110,000.


Rising mortgage payments and sky high credit card bills lie at the root of the problem.


Yet impending difficulties with the household finances have done little to discourage millions from hitting the sales.


Figures compiled by the Brent Cross centre in London, one of the nation's busiest malls, revealed shoppers spent £800 a second on December 27.


Lenders, meanwhile, are being far more cautious when extending credit. Those already caught in the downward debt spiral, who cannot make ends meet without consolidating old loans or moving debt on to new low interest credit cards, may be tipped towards insolvency.


Mark Sands of finance experts KPMG said: 'It has been very easy in the past to borrow new money, and extra credit has been a lifeline for people already in debt, with consolidation loans, second mortgages, a new credit card.


'In the year ahead those lifelines are not going to be there for many people. Applications for new cards are being rejected 50% of the time, up from about a third before the start of the credit crunch.'

High interest rates are also being blamed for borrowers' woes. Mr Sands said that homeowners coming off cheap, fixed rate mortgages in January face rocketing repayments, for example around an extra £400 a month to £1,390 on a £150,000 loan.

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