The number of people becoming insolvent has rocketed to a fresh record of more than 23,000 during the first three months of the year, leading experts to warn that personal bankruptcies could easily surpass the 100,000 mark this year.
Personal insolvencies soared 73 per cent to 23,351 in the first quarter compared with the same period last year, Department of Trade and Industry figures showed. Insolvencies have been hitting record highs quarter after quarter.
Talking of an endemic "spend now, pay later" culture, experts have long warned about the effect of soaring personal debts and rising unemployment when utility bills and council tax are rising.
The number of companies going into liquidation rose to 3,439 in the quarter, up 17 per cent from a year ago. Manufacturers of chemicals were hardest hit with a 62 per cent increase in bankruptcies. In the light of escalating energy costs, the number of manufacturers going to the wall is set to spiral even higher in coming months. A spokesman for the Treasury played down the figures, saying: "The rate of company insolvency remains near historic lows, while new businesses continue to start up at a rate of 4,000 a week."
Of the personal insolvencies, about two-thirds declared themselves bankrupt at the start of the year while the remainder took out Individual Voluntary Arrangements - an alternative to bankruptcy that allows debtors to reach agreement with their creditors. IVAs, which are becoming increasingly popular as they remove the stigma of bankruptcy, have more than doubled to 7,961. Experts at KPMG expect to see more than 60,000 bankruptcies and 40,000 IVAs this year, by far the highest level ever seen.
Pat Boyden, at PricewaterhouseCoopers, said: "We are paying the price for a spend now, worry later culture. Record personal insolvencies are the result of a debt culture which has become endemic in the UK. Some people are now so in debt that they are using credit to buy everyday items like groceries, and possible interest rate rises could worsen the situation."
In another sign that rising consumer debts are taking their toll, orders for home repossessions surged by 57 per cent in the quarter. The Department of Constitutional Affairs said courts ordered 21,997 repossessions, though about half of these were suspended orders, which give the homeowner a chance to catch up with mortgage arrears before the bailiffs are sent in.
The news came hot on the heels of a campaign to persuade Carol Vorderman, the co-presenter of Channel 4's Countdown, to stop endorsing consolidated loans secured against borrowers' homes in TV adverts.
There has been a dramatic increase in the number of people calling helplines and asking the Citizens Advice Bureau and other organisations for guidance.
Mike Gerrard, the head of personal insolvency at Grant Thornton, noted that over the past five years there have been more than 226,000 personal insolvencies - equivalent to more than half the population of Leeds.