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Insolvencies to soar in first months of 2007

04 January 2007
Almost 30,000 people will become insolvent in the first quarter of 2007, accountants Grant Thornton have claimed.

One third of those will have been pushed into this final stage of financial incapability by their Christmas spending.

"Last year, during the period straight after Christmas ... we witnessed the highest-ever amount of people going into personal insolvency," Mike Gerrard, of the firm's personal insolvency section, told the Guardian.

"This year things could be even worse."

Consumer group Credit Action this week warned total UK debt is rising by £1 million every four minutes.

To cope with the financial strain, debt management firm Debt Free Direct is predicting the number of people taking out individual voluntary arrangements (IVAs) will double within the next two years.

The IVA, adopted by 45,000 people across the UK in 2006 according to accountants KPMG, allows debtors to repay a set amount each month in exchange for creditors freezing interest payments on the debt.

KPMG also found that about 65,000 people were declared bankrupt in 2006, resulting in personal insolvencies totalling 110,000 – 63 per cent higher than the 2005 total.

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