According to a report from the accounting firm KPMG, the number of people facing insolvency in 2009 is expected to reach record high levels.  The firm believes that close to 150,000 people in the United Kingdom alone will go bankrupt or enter into some form of official debt arrangements.  This number is up from the estimated number of people who filed in 2008.  The firm stated that people who are heavily in debt from day to day spending or holiday spending will be ill equipped to deal with the current economic downturn and recession, and the latest official figures are showing that personal insolvency has steadily continued to rise. 

KPMG suggested that creditors wrote off at least £1.1 billion in bad debt in 2008 alone.  IVAs saw an average debt of £47,800 with about 38% of this amount being repaid to the creditors.  The numbers in 2008 were close to the same as in 2007, and most of the debt was from credit cards and loans that were used for holiday spending and household bills that spiralled out of control.  The accountants estimated that around 2,500 people entered into IVAs in 2008 with debts that totalled more than £100,000,000. 

Director of personal insolvency at KPMG, Mark Sands summed up the way people tend to look at debt.  "By the time people realise the extent of the problems, their total debts would have swelled by interest, charges and more borrowing to cover minimum repayments."  Sands went on to note that the high levels of debt that people are currently carrying show that most do not have any form of realistic hope of getting their repayments made.  This situation is only compounded when people use their credit to pay for Christmas presents, sales shopping, and other spending as well as the current economic downturn and recession the United Kingdom has found itself in.  "Those carrying high levels of debt will be ill-equipped to tackle the effects of the downturn such as a reduction in income or a period of unemployment," Mr. Sands said.  "Many faced with these difficulties will find that their options may be limited. Formal insolvency will, for many, be the only way out." 

KPMGs personnel advise that all debtors keep open doors of communication with their creditors to help them deal with their debt during these trying times.  In April 2009, the government intends to introduce a new debt relief system designed to help people with small debts in an attempt to help them avoid full bankruptcy proceedings.  The new system - called Debt Relief Orders - will allow people with debt less than £15,000 and minimal assets or surplus income write off their debts without having to file for full bankruptcy.  

Individuals are also advised to research their options as an IVA, administration order, debt management plan or even a debt relief order may be a better option for them than filing a bankruptcy.  Bankruptcy should be left as a last resort if all other options are exhausted due to the severe consequences that come with bankruptcy.