The prediction comes as the personal insolvency practice of accountants Grant Thornton predicts that there will be a whopping 30,000 personal insolvencies in the first three months of this year.
Of this figure, Grant Thornton says 10,000 will be due to excessive Christmas spending.
Last year a record 1.4bn was written off as a result of individual voluntary arrangements, research by KPMG has revealed, with an average consumer entering an IVA owing 52,000.
But this year Grant Thornton predicts things could be even worse due to interest rate rises, sky high utility bills and increasing unemployment.
Citizens Advice Bureau says that this month it expects to exceed the 140,000 debt problems that it dealt with in January 2006 as a result of the nation’s Christmas debt hangover.
Andrew Montlake, partner at Cobalt Capital, says the obvious effect of growth in personal insolvencies will mean an expansion of the sub-prime sector.
But he adds: “The question is that as competition for these customers increases, how far will rates and criteria improve? We could soon see little difference between prime and sub-prime rates.”
Last week also saw the launch of IVA.com, a website designed by accountants and lawyers with the aim of informally regulating the IVA industry. The website makes industry-wide customer feedback publicly available in a bid to reduce mis-selling, raise awareness and encourage competition for consumer benefit.