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New Year to Herald Record Bankruptcies The combination of Christmas overspending and already excessive borrowing is expected to result in as many as 5,000 bankruptcies by the end of January 2005. Whilst retailers may have been bemoaning the apparently disappointing Christmas spend so far, with an estimated spend in excess of £7bn spent by Christmas Day some people have obviously be shopping in earnest. "For many, Christmas shopping sprees will have a sting in the tail when credit card bills hit doormats in January", says Mike Gerrard a personal insolvency expert at Grant Thornton. "A little overspend will not break the bank for most, but for an increasing number of individuals that are already financially overstretched, the risk of plunging further into a spiral of debt, which may lead to bankruptcy, is real". Whilst 2004 may have witnessed record numbers of personal insolvencies, expected to be up over 70% on 1995 and total a staggering 45,000 for the year, this is nothing compared to what could be awaiting the country in 2005. Unlike the last recession when insolvencies spiked due to rising unemployment, high interest rates and plummeting house prices, this time the blame must be laid squarely at the feet of the wantonly indebted consumer. "The root of the problem rests squarely with excessive consumer borrowing and spending", according to Gerard. "A fall in housing values could also see the problem get worse as people's ability to remortgage, a practice often used to repay debts, will reduce". Stephen Rose, Director of the Debt Advice Bureau agrees, "For a large proportion of homeowners, house prices don’t even need to fall for there to be a problem. If house prices stagnate all those homeowners who have relied on continually rising house prices to bail them out will suddenly have to service all their debts out of income alone. Then they will have a serious problem".   Related Links: Are You Considering Bankruptcy? BBC THREE are researching a programme into people's experiences of bankruptcy.   Published Friday 24th December 2004

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