Britain saw an unprecedented rise in personal insolvencies in 2006, with a massive surge of 59%, according to figures released by the department for Trade and Industry (DTI).
Individual insolvencies in England and Wales were 107,288, the figure for 2005 was 67,584.
The Bank of England, by raising interest rates, has lessened the threat of inflation but has of course increased the costs of borrowing; this in turn creates an upward pressure on the number of insolvencies.
Louise Britain, head of personal insolvency at Baker Tilly, is quoted as saying:
"People are blindly taking on debt without thinking about how they'll repay it.
As a nation, we have totally binged. I think the numbers of insolvencies will continue to rise."
Total outstanding debt reached £1.3 Trillion in December.
The surge in bankruptcies has been helped by the use of individual voluntary arrangements (IVA's), which allow individuals to write off most of their debt and make gradual repayments on the remaining amount.
The banks are fighting back, and are starting to reject more debt plans. Needless to say, as with many other financial products, some IVA's have been marketed to the wrong people.
However, the Bank of England's governor, Mervyn King, says that it's not very likely that debt will become a significant problem.
"It's a minority of households.
It's a major social issue, but the numbers aren't large enough to amount to a major threat to the overall level of consumer spending."
I can't but help wonder what Britain he is living in.
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