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This is the equivalent to nearly seven million people in the UK struggling to cope with their existing debt.

The outlook for the next 12 months does not offer any respite. When polled by YouGov 35 per cent of those living with debt – equivalent to 11 million people – admitted that they are likely to find it increasingly difficult to meet repayments in the coming year.

Running out of options 

Steve Treharne, KPMG partner and personal insolvency practitioner, said that those people who have been robbing Peter to pay Paul, transferring balances from card to card, re-mortgaging and taking equity out of their property to pay off spiralling debt are fast running out of options.

“The credit crunch is already seeing credit card companies reducing limits and increasing their rejection rates for new customers,” he added.

Treharne warned that people who previously had access to competitive mortgage deals, despite being late with a couple of payments, are going to find it very difficult to find a deal.

“Combine all of this with increasing energy, council tax bills and petrol prices and you can see why we are predicting a record 130,000 personal insolvencies this year,” he said.

Treharne said that the pressure is building on the over-indebted and that having had their home repossessed is usually the final straw for many.

He explained that they usually give up the fight and enter into a formal insolvency agreement such as bankruptcy or an Individual Voluntary Arrangement.

Borrowing to live

The research also identified more than a fifth (22 per cent) of people ‘resort to increasing levels of debt to live on a day to day basis’.

These individuals are reverting to credit cards or loans to pay for food, household bills and in some cases mortgage payments.

When asked about the social stigma associated with being in debt, half of the people questioned agreed that it had decreased in the last 10 years, 42 per cent thought it had decreased in the last 5 years and nearly a quarter thought it had decreased in the last 12 months.

The survey also revealed a significant gap between how open different generations are when discussing their debt with friends and family.

Nearly half (48 per cent) of 18-24 year olds who on average had between £10,000-19,999 of debt were happy to discuss their level of debt with friends.

Those over 55 years old who had on average £2,500-£4,999 worth of debt were the least open, with only 18 percent admitting their level of debt to friends.

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Related links

• KPMG