One family to be made bankrupt every four minutes as credit crunch forces more cash-strapped families into debt

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One family every four minutes will be plunged into bankruptcy or another type of personal insolvency this year, experts warned yesterday.

The rise will be fuelled by soaring household bills, poor pay rises and a lack of cheap loans.

Accountants KPMG predicted at least 130,000 Britons would lose their battle with their debts this year - a record-breaking 355 a day, or one every four minutes.

Official figures from the Insolvency Service yesterday showed 25,264 insolvencies between January and March. There were 15,651 bankruptcies and 9,614 Individual Voluntary Arrangements, which is when people make a deal with their creditors.

But experts said this is "the calm before the storm" with the numbers set to explode, even into 2009. It can take a year or more before those struggling with debt reach the point of insolvency.

Mark Sands, KPMG's director of personal insolvency, said debt had reached 'horrendous' levels. The average debt of somebody taking out an IVA is nearly £50,000 - excluding their mortgage.

More than 500 had debts "in excess of £100,000", typically built on credit cards and personal loans. Many frittered the money away and tried borrowingon one credit card to pay the bill on another. The credit crunch means that this is no longer possible, or will be much more expensive to do.

Falling house prices and Britain's mortgage drought also means people can no longer use their homes as a "cash machine", Mr Sands said.

Mike Gerrard, a personal insolvency partner at accountants Grant Thornton, said "the worst is yet to come".

He added: "Where once over-indebted individuals relied on remortgaging or extended limits on credit cards to stave off bankruptcy, these methods have now been largely shut off because of global financial pressure. This means insolvency proceedings become a reality much quicker.

"Life is always tough for those with serious debt problems. The credit crunch is managing to amplify those problems even more."

•The number of companies going bust rose 54 per cent in the first three months of this year, the figures also revealed. In England and Wales, 858 companies went into administration, compared to 557 in the previous quarter.