Record 370 people a day go bust - Mirror.co.uk

A RECORD 135,000 people went bust last year – with warnings of worse to come as Government spending cuts and tax rises hit home.

The grim tally revealed in official figures yesterday is the highest since records began in 1960 and means a heart-wrenching 370 Brits a day threw in the towel after being swamped with debts.

A glimmer of hope came with figures for the last three months of the year when individual insolvencies dropped by 13.6%.

But experts reckon the fall was partly due to banks, credit card firms and others who are owed money giving indebted families a stay of execution. Creditors could soon demand their money again, ­triggering a fresh wave of misery.

Yet the report comes in the same week the Government scrapped funding for a debt advisory service.

Campaigners said the Coalition's decision to pull the plug on the Financial Inclusion Fund would make it even harder for struggling families to help keep their head above water.

Many fear those in trouble will be forced into the hands of rogue debt management firms.

Delroy Corinaldi, of debt charity the Consumer Credit Counselling Service, warned: "The picture is bleak."

Free access to credit has seen our personal debt mountain soar to £1.4trillion – but the spending spree many enjoyed has come back to haunt a growing number of families, with insolvencies doubling since 2005.

Some believe this year's figure could hit 150,000 as paltry wage rises and soaring bills result in the biggest squeeze on household incomes since the 1920s.

And many fear the figures represent the tip of the iceberg, with millons more Britons holding on by their finger tips. Steven Law, president of the insolvency trade body R3, said: "Unfortunately, for those that are struggling with debt the worst may not be over.

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"Inflation, the rise in the cost of fuel and the increase in VAT means that the cost of living has risen at a time when most of us are experiencing pay freezes, pay cuts and, in some cases, unemployment."

Meanwhile Brian Johnson, of insolvency firm HW Fisher, warned some creditors were only holding off taking those in debt to court in order to claw back the most money.

"Creditors are avoiding the nuclear option," he said. "They can spend money bankrupting people but then they won't get their money back.

"They are biding their time but as asset values rise, creditors may well make their move."

Howard Archer, chief economist at IHS Global Insight, added: "The decline in the number of individual insolvencies is obviously good news but the reality is many people remain at risk, particularly if economic activity is muted and unemployment moves higher in 2011."

Pay Boyden, expert at PricewaterhouseCoopers, said insolvencies tended to peak among those in their 30s and 40s, with men more likely then women to end up bust.

"But that is changing all the time," he added.

The figures revealed a total of 135,089 people were declared insolvent in England and Wales last year, up 0.7% on 2009. Nearly 60,000 were made bankrupt, a drop of 21% on the year before – but the number of individual voluntary arrangements, where interest is frozen in exchange for a set amount repaid each month, rose 6.5% to almost 51,000.

A further 25,179 took out debt relief orders, a way to escape bankruptcy for those with debts of less than £15,000 and limited assets.

On the plus side, the Insolvency Service figures showed fewer ­companies going to the wall.

Some 16,045 firms were declared insolvent last year – down almost 16% on 2009.