Christmas Spending ‘Could Cause Record Bankruptcies’

Posted 2008-01-2

Huge spending over Christmas could leave 130,000 people facing bankruptcy this year, say accountants KPMG.

Higher mortgage payments and big credit card bills are also thought to be causing the predicted total, which stood at just below 110,000 in 2007.

The firm said this 130,000 will be declared bankrupt or take out Individual Voluntary Arrangements (IVA’s), allowing them to repay banks and credit card firms a portion of their debts before starting again with a clean slate.

Insolvency may hit anyone already in difficulty who cannot make ends meet without consolidating old loans or moving debt on to new low interest credit cards. The tightening of lending practices is thought to have increased this possibility.

Mark Sands of KPMG said: “It’s been very easy in the past to borrow money and extra credit has been a lifeline for people already in debt.

“But in future, these lifelines are not going to be there for many people. Half of new credit card applications are being rejected – up from 30% prior to the start of the credit squeeze.”

Mr Sands added high interest rates are also responsible for people spiralling towards debt and homeowners whose fixed-rate mortgages expire. This group face soaring repayments, of around an extra £400 a month to £1,390 on a mortgage of £150,000.

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