330 go bankrupt every day as debt crisis grows

A record 30,075 people became insolvent between January and March, the highest number since records began in 1960.

The figures highlight the dramatic escalation in the number of personal bankruptcies and its alternative, the Individual Voluntary Arrangment (IVA).

Since Labour was elected in 1997, the number has rocketed by nearly 400 per cent.

Experts warned last night that the soaring numbers of insolvencies will get worse, not better. Details of the bankruptcies emerged as new figures revealed that house repossessions have also risen.

It is now feared a record-breaking 130,000 individuals will be declared insolvent this year, equal to every single adult and child in the Dorset town of Poole.

Liberal Democrat Shadow Chancellor Vince Cable said the figures from The Insolvency Service were 'truly astonishing.'

He warned: 'But these are not freak figures. Sadly they are likely to get even worse.'

Shadow Chancellor George Osborne said: 'Each of these insolvencies involves a personal tragedy.'

Mark Sands, of accountants KMG, blamed the rising debt casulaties, up 24 per cent on the same period last year, on a major cultural change.

He said: 'We used to see people going into debt for what I would call a valid reason, such as a business collapsing or suffering a major illness. 'But today it is usually because people are living beyond their means. They are trying to keep up with the Joneses.'

Having spent too much on their credit cards and taken out huge personal loans, families are 'tipped over the edge' by rising mortgage costs.

Howard Archer, chief UK economist at Global Insight, said 'a significant number of people have borrowed to their limits and are in a very vulnerable position.'

KPMG said a typical client taking out an IVA now has unsecured debts of £52,700, excluding a single penny of their mortgage.

In a sign of the new 'spend,save' culture, their debts are typically spread between ten different credit cards and personal loans. A lot of their debts is not even money that they have spent, but the huge interest bill on the money they have borrowed.

The Citizens Advice Bureax said yesterday that it dealt with 1.4 million people who had debt problems in 2005/06, a record number.

Another interest rate rise by the Bank of England is 'a cast iron certainty' next Thursday, with some even fearing a half point increase.

Rates are already at a six-year high of 5.25 per cent, and experts say another jump would push even more people over the edge.

A typical mortgage is now £150,000 and the cumulative effect of four interest rate rises in less than a year would be 'devastating.'

If rates rise again, the monthly repayments will be about £100 more expensive than they were before rates started going up last August.

Sue Maund, a partner at the accountants Baker Tilly, said, "Another rate rise would have a quite devastating effect.

"There are an awful lot of people who are living very close to the edge.

"They are managing to keep the wolf from the door but what is going to happen to them when rates go up?"

Separate figures, also published by the Department for Constitutional Affairs, showed only a small rise in the number of homeowners who are facing repossession.

Between January and March, there were 33,715 possession claims issued and 21,931 orders made, an increase of only about one per cent on the same period last year.

But experts said this is only a temporary respite before the impact of interest rate rises start to hit later this year.

A 'claim' is when a bank or other creditor begins proceedings in a county court for repossession. An 'order' may then be granted by the court.

Many do not result in repossession as most people will do anything possible not to lose their home.

The number of repossessions has been climbing rapidly, up 65 per cent in 2006 to 17,000, the highest level for six years.