Figures released today indicate that almost a third of the personal insolvencies declared in March have been triggered by over spending at Christmas.
R3, the insolvency trade body, is made up of 97% of the UK’s insolvency practitioners and predicts that more than 150,000 people will become insolvent during 2010.
Peter Sargent, president of R3, said: ‘Unfortunately, many people who were struggling financially at the end of last year allowed their spending to spiral during the festive season, in order to give their families a ‘normal Christmas’.
‘These people will now be suffering from the ‘Christmas Crunch’, having seen their debts snowball since the large credit card bills began to hit their mats in January.’
Bankruptcy, IVAs and debt relief orders
Personal insolvency can take several forms. Individuals may be declared bankrupt, enter an Individual Voluntary Arrangement (IVA) or obtain a Debt Relief Order (DRO), depending on their circumstances.
However, it is crucial for individuals to get independent advice before making a decision about which form of insolvency is right for them. For example, while IVAs may be suitable for some debtors, and are perceived as carrying less ‘stigma’ than bankruptcy, they can be expensive to arrange and administer.
Get help with debts
Mr Saville said: ‘Although sad, R3’s statistics are not surprising. It is all too tempting to brush your difficulties with debt under the carpet at Christmas – but over-spending during the festive season may simply compound existing problems and lead them to re-emerge later.
‘No matter what the time of year, if you are struggling with debts the best thing you can do is confront this head-on. By tackling problems as soon as they arise, you stand a better chance of avoiding insolvency altogether.’
For information on what you can do if you’re worried about debts, read the free Which? How to deal with debt advice guide.
Which? Money when you need it
You can follow @WhichMoney on Twitter to keep up-to-date with our Best Rates and Recommended Provider product and service reviews.
Sign up for the latest money news, best rates and recommended providers in your newsletter every Friday.
Or for money-saving tips, and news of how what’s going on in the world of finance affects you, join Melanie Dowding and James Daley for the Which? Money weekly money podcast
For daily consumer news, subscribe to the Which? news RSS feed here. And to find out how we work for you on money issues, visit our personal finance campaigns pages.