Increased financial pressures could cause a record number of people to be declared bankrupt or insolvent during the coming year, it has been claimed.

Accountancy firm KPMG said that a tightening of lending criteria combined with increased spending over the Christmas period could lead to more than 130,000 borrowers entering into Individual Voluntary Arrangements (IVAs) or being declared bankrupt in 2008.

That would be a 19% jump on figures which the group expects will be recorded this year.

Around 43,000 people wrote off some of their debts with an IVA in 2007, while a further 67,000 people were declared bankrupt, swelling the total number of personal insolvencies to the highest ever level, KPMG said.

The typical IVA debtor was found to owe £50,300, but more than 2,500 people owed more than £100,000.

Mark Sands, KPMG's personal insolvency director, said: "This high average level of debt clearly indicates that too many people have borrowings that they have no realistic hope of repaying.

"Any excessive spending over Christmas and at the New Year sales, especially where goods are paid for on credit, risks tipping even more consumers over the edge.

"The credit crunch is resulting in increased rejections of credit card applications and a reduction in the availability of loans secured by a second charge on the family home.

"Those in difficulty will find that their options are becoming limited - formal insolvency will for many be the only way out."

This year, £1.3bn of bad debts were written off by creditors because of people taking out IVAs, compared with £1.4bn in 2006.

KPMG said that lenders are getting increasingly concerned about the amount of people opting to take out IVAs, with 17% of people having their arrangement turned down by creditors in 2007, compared with 15% in 2006.

Mr Sands added: "Lending institutions have over the past year raised concerns as to the potential misuse of IVAs, where perhaps they are being recommended when they are not the most appropriate solution.

"It remains essential that all involved continue open dialogue about the wide variety of solutions which are available to the increasing number of consumers struggling to manage their debts."

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