The number of consumers becoming insolvent is expected to soar next year despite figures from the Insolvency Service showing a lull in bankruptcies and individual voluntary arrangements (IVAs).

Accountants say today's figures disguise the problems that are set to emerge in the consumer credit market, which will give people fewer means of combating debt.

The number of consumers becoming bankrupt or ridding themselves of unmanageable debt using an IVA fell by nearly 7 per cent in the three months to the end of September, compared to the same period a year ago, according to the Insolvency Service.

Steve Treharne, of KPMG, the accountant, said: "This is really a lull in the storm. The traditional ways that people can delay the impact of money worries such as a new credit card or a second charge on their home are gradually being closed off as a result of the credit crunch. This is now a plateau, but all the indicators are that consumers are in for a rough ride."

While the total number of insolvencies in England and Wales fell, the number of people seeking bankruptcy rose by 1 per cent year on year to 15,600.

But there was an 18 per cent fall in the number of people seeking an IVA, according to the non seasonally-adjusted figures.

These arrangements, which allow debtors to freeze and sometimes cut their debt while paying off a manageable sum each month have been affected by a dispute between creditors and IVA companies. Some creditors believe the fees charged by IVA companies are too high, and have rejected high numbers of IVA applications. Nearly one in five IVA applications are rejected by lenders.

John Hall, chief executive of personal debt solutions provider newtomorrow.com, said:“These figures aren’t surprising and the underlying position is much worse than the figures suggest. There is a dam waiting to burst and the cracks are starting to appear. The reason the figures are not higher still is that lenders are making it more difficult for their customers to put a voluntary debt solution in place by insisting on unachievable repayment levels, resulting in significantly more house repossessions."

Mr Treharne said: "According to the Council of Mortgage Lenders the number of property repossessions is likely to rise by 50 per cent in 2008. If people struggling with debt lose their home they often give up and either go bankrupt or enter into an IVA."

Mike Gerrard, Head of Personal Insolvency at Grant Thornton, said: "In spite of relatively benign economic conditions over the past decade, personal insolvencies have gone through the roof. This recent drop is simply the calm before the storm as the credit crunch begins to bite beyond financial markets."

Some 111,359 people went into bankruptcy or entered into an IVA in the year to the end of September 2007, up 13 per cent from the year to the end of September 2006.

The number of consumers voluntarily seeking bankruptcy rose to 13,173 in the third quarter of the year, up from 13,036 in the third quarter last year, and nearly double the number of people who sought to become bankrupt in the third quarter of 2004.

Company insolvencies

About 3,100 companies went into liquidation in the third quarter of this year, nearly 3 per cent down on the number of company liquidations in the same period last year. The number of compulsory liquidations fell by 4 per cent, while voluntary liquidations fell by 2 per cent.

Mike Jervis, partner in the Business Recovery Services practice at PricewaterhouseCoopers, said: “Credit has been readily available to corporates until this summer and the downward trend in corporate insolvencies reflects this. However, while companies have so far avoided formal insolvency, less creditworthy corporates are finding that it is increasingly difficult to borrow at affordable rates in the current climate. There is still uncertainty as to how many businesses will fail as a result of the more restrictive credit environment.”