New figures reveal 184 people a day went bankrupt in 2008.
The Insolvency Service says 28,471 people went into bankruptcy or entered into an individual voluntary arrangement (Iva) in the quarter ended 31 December 2008.
That’s an increase of 19 % compared to the same quarter in 2007.
A total of 106,544 personal insolvencies were recorded in 2008, which is in line with the previous two years.
Accountant KPMG predicts more gloom in 2009 as the economic downturn gathers pace, leading to record levels of personal insolvencies in 2009.
Potentially more than 150,000 people are expected to enter into an Iva, be declared bankrupt or enter into a debt relief order, (a new alternative to bankruptcy which will be introduced in April 2009) during 2009.
Mark Sands, director of personal insolvency at KPMG said: ‘Falling house prices, the general downturn and the associated increases in unemployment are starting to have an impact.
‘Whilst consumers will fight to keep their jobs and their family homes, for those who lose both there is often little reason for someone with debts and assets not to declare themselves bankrupt.’
Debt relief orders
Bankruptcies have increased year on year while Ivas still show a slight decline due to the number of Ivas that were rejected.
KPMG found that those with a mortgage make up 51% of people seeking help, an increase from the 30% level seen in 2007.
It predicts that falling property prices will mean many consumers have little or no equity in their homes and may be unwilling to commit to a five year repayment plan to reschedule their credit card and loan repayments.
In April 2009 the government plans to introduce debt relief orders which will allow consumers with debts of less than £15,000, and minimal assets or surplus income, to write off their debts without entering into a full blown bankruptcy.
Which? news RSS Feeds
For daily consumer news, subscribe to the Which? news RSS feed here. If you have an older web browser you may need to copy and paste this link into your newsreader: https://www.which.co.uk/feeds/reviews/news.xml . Find out more about RSS in the Which? guide to news feeds.
Or why not get weekly updates and money saving tips delivered to your in-box by subscribing to the Money Email?