More than 10,000 people a month are expected to declare themselves insolvent this year as a culture of unsustainable debt grows among the “buy now, pay never” generation.

Acountancy experts are forecasting a record number of personal insolvencies in the first three months, after a year in which bankruptcies and similar arrangements soared above the 100,000 mark for the first time.

Financial advisers say that the figures point to the emergence of a generation who take debt for granted and for whom bankruptcy has lost its stigma.

The use of individual voluntary agreements (IVAs), a popular alternative to bankruptcy that protects debtors’ homes from automatic repossession, has grown steadily over the past two years and is expected to soar this year.

Grant Thornton, the financial adviser, forecast that 30,000 personal insolvencies would be filed in the first three months of the year, of which a third would be as a result of excessive Christmas spending.

That follows news that lenders wrote off a record £1.4 billion last year, as the use of unregulated IVAs spreads.

Mike Gerrard, the head of Grant Thornton’s personal insolvency practice, said: “Last year, during the period straight after Christmas, when most bills started to hit the doormat, we witnessed the highest-ever amount of people going into personal insolvency. This year things could be even worse.”

Rising utility bills, interest rates and lower growth in real disposable incomes have squeezed consumers. In addition, legal changes to boost entrepreneurship three years ago are believed to have increased insolvencies. They included cutting the time for which a person is declared bankrupt from three years to one.

Some financial experts gave warning that fraud is on the rise, as the use of IVAs grows. Louise Brittain, head of personal insolvency at the chartered accountant Baker Tilly, who specialises in IVA fraud, said: “I have never been so busy.”

About 45,000 people entered IVAs last year, double the figure from the previous year, according to estimates from KPMG, the accountants. People applying for IVAs had average debts of £52,000 but had offered to repay an average of only 39 per cent.

Ms Brittain said she believed that there had been a step-change in people’s attitude to debt, and forecast that up to 150,000 people might file for either bankruptcy or enter an IVA this year.Further legal changes that come into effect in September will simplify negotations for those with debts below £25,000. Ms Brittain said debtors would end up repaying a smaller fraction of their loans as a result. Mervyn King, the Governor of the Bank of England, has told borrowers to think very carefully before running up debts. He told MPs in November: “The real problems in indebtedness are not in the mortgage market but in the unsecured debt market.” A Bank of England survey last month found that the top reasons for people getting into problems with debt were a temporary lack of cash, overspending, higher than expected household bills, unemployment and cuts in overtime pay.

The rise in problem debtors is masked by an overall slowdown in the amount of new borrowing on credit cards. Bank of England data show that Britons borrowed an additional £12.8 billion in the year to October, the lowest since 1997.

In the red

27,644
Number of insolvencies in England and Wales in the third quarter of 2006

55.4%
Year-on-year rise in insolvencies in the third quarter

77%
Proportion of bankruptcies not among the self-employed in that quarter

7,583
Number of Individual Voluntary Agreements (IVAs) in 2003

20,293
Number of IVAs in 2005

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