Record 20,000 set to go bankrupt

More siren voices.................

Record 20,000 set to go bankrupt

Jane Padgham, Evening Standard

A RECORD number of people will go bust in the New Year because of excessive Christmas spending, experts warn today.

Accountants Grant Thornton predicts the first quarter of 2006 will see nearly 20,000 personal insolvencies - the highest number since records began in 1960.

Some 6500 of these will be a direct result of people racking up too much debt on credit and store cards over the festive season.

Bankruptcies are already at record highs as the availability of cheap credit has encouraged millions-to pile up debts they cannot afford to repay.

Latest official figures showed more than 12,000 people went bust in the third quarter, a 30% increase on a year ago, and a further 5500 entered into individual voluntary arrangements.

Mike Gerrard, head of Grant Thornton's personal insolvency practice, said: 'Many people will be funding their Christmas shopping sprees on their credit cards.

A little overspend will not break the bank for most, but for those who are already financially overstretched, spending that little bit more during the festivities may represent the straw that breaks the camel's back, plunging them further into debt and quite possibly towards bankruptcy.'

Gerrard said an individual with 'serious' debts will typically have a mortgage between £50,000 and £100,000, and unsecured debt of more than £50,000.

'While this may sound like a warning call to stay away from the High Street, the fact remains that we regularly see people, especially over Christmas, add to their problems in quite a substantial way,' he said.

Borrowing has slowed but is still rising more than 10% a year. Having smashed the £1 trillion barrier, consumers are continuing to pile up ever more debt. Citizens Advice is seeing more than one million new debt cases a year, most related to unsecured consumer credit.

Lenders are taking steps to curb reckless borrowing. Barclaycard, Egg, Abbey and Co-operative Bank have agreed to share information on credit card borrowers to spot those getting into difficulties. And Barclaycard said it is turning away more than half of applications.

Nick Hood, partner at insolvency specialists Begbies Traynor, said: 'For those who were intending to bail themselves out by transferring their debt from one card to another, the game is up. The normal escape routes have been closed off.'

Citizens Advice said: 'We advise people to keep a note of everything they spend and not to let debts linger. If they can't afford to keep up with repayments, they should seek advice.'