A RECORD 100,000 people — equivalent to the population of Exeter — will go bankrupt this year, debt specialists predicted yesterday, after official figures showed another surge in personal insolvencies.

Individual insolvencies jumped to a record 27,644 in the three months to September, up 5.7 per cent on the previous quarter and 55.4 per cent higher than in the corresponding period in 2005.

The Government’s Insolvency Service recorded a particularly steep rise in Individual Voluntary Arrangements — pacts between borrowers and lenders enabling debtors to walk away from some of their obligations.

IVAs in the three months to September soared to 12,228, up 9.8 per cent on the previous quarter and up 117.9 per cent on the same period in 2005.

The rise in personal bankruptcies, to 15,416, was less pronounced, up 2.7 per cent on the previous quarter and up 26.6 per cent year on year.

Steve Treharne, head of personal insolvency at KPMG, the accountants, said IVAs were growing at an astonishing pace: “Together with bankruptcies, the traditional option for the over-indebted, we are now seeing new levels of personal insolvency that would never have been imagined a few years ago.

“We predict annual rates will exceed 100,000 for the first time by the end of 2006.”

Louise Brittain, head of the personal insolvency division at Baker Tilly, said: “These figures are quite shocking. The alarming growth in IVAs reflects British consumers’ determination to spend beyond their means.”

She argued that the IVA system allowed people to go bankrupt without fear of the consequences. Changes in legislation due to come into effect next year would make IVAs an even more attractive option for those owing less than £25,000, she said.

Reckless borrowing, reckless lending, growing unemployment, rising utitility bills and interest rates and heavy marketing by specialist firms offering IVA advice have all been cited for the steep rise in insolvencies. Personal involvency has also lost some of its stigma.

With economists unanimously predicting a rise in base rate from 4.75 per cent to 5 per cent next week, the pressure on some borrowers is likely to intensify. In further evidence of borrowing pain, banks and other lenders initiated repossession action against 35,626 home-owners in the third quarter, the highest level for 14 years, according to figures from the Department of Constitutional Affairs.

Repossession court actions are the first step in the process of lenders seizing homes from people defaulting on mortgages. Only a small proportion of the cases result in householders losing their homes.

Clydesdale Bank and its sister Yorkshire Bank yesterday wrote off £126 million to cover loans and credit card debt they do not expect to recover for the year to September, a 46 per cent rise on the previous year.

On the insolvency figures, George Osborne, Shadow Chancellor, said: “There is a personal tragedy behind each of these insolvencies and this shows that many families are feeling the pressure of rising interest rates and rising fuel bills.”

The Liberal Democrats called for a national chain of advice centres to help people struggling with debts.

But the Government is thought to be relatively relaxed about the trend, arguing that easier insolvency arrangements encourage entrepreneurs, making it easier for business-creators to try again after failing. Bankruptcy rates are five times higher in the US than the UK.

HOW DEBTORS SET UP AN IVA

The IVA takes effect if at least 75 per cent vote in favour of the proposals. The IP supervises the collection of money and distribution to creditors

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