Some 33% of people who go insolvent during the first three months of the year will have spent excessively over Christmas, it has been claimed.

Accountancy firm Grant Thornton predicts that 28,000 people will be unable to cope with their debts during the period, and as a result will either file for bankruptcy or take out an individual voluntary arrangement (IVA).

And the group estimates that 120,000 people will go insolvent in 2008, which will surpass its predictions for 110,000 insolvencies for 2007.

Mike Gerrard, head of Grant Thornton's personal insolvency practice, said: "Sadly, many individuals spend up on credit at Christmas and pay no heed to the financial warning bells.

"Come January, they find themselves in a situation where previous financial woes are compounded by the bills arriving from the festive season and in these situations insolvency becomes the only way out."

While Mr Gerrard believes that insolvency figures for the first quarter of 2008 will be slightly below ones for the same period of the previous year, he said that numbers will rise again as banks continue to tighten their lending criteria, the housing market slows and consumers begin to feel the pinch as they face higher food and fuel bills.

He said the Bank of England's decision to cut interest rates by a quarter point in December will do little in the short-term to help people who are struggling to manage their debts after the frequent increases in rates seen during the past two years.

And he added that the problem is likely to get worse as 1.4 million people who are expected to come off low, fixed-rate mortgages in 2008 come to terms with much higher repayment rates.

The group said the steady increase in the cost of living is also taking its toll on people whose finances are already almost at breaking point.

It said the cost of filling up a car with unleaded petrol increased by 16% during the past 12 months, while gas and electricity prices are also expected to jump by a further 10%.

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