THE scale of Britain's consumer debt crisis was laid bare today by figures showing a 75% leap in individual voluntary arrangements to deal with debts last year.
But hopes that the hangover from the recent borrowing binge has peaked were boosted by signs that people are starting to rein in reckless spending and save instead.
Accountants KPMG said more than 16,000 people used an IVA - where debtors put together a repayment plan with their creditors - to clear a portion of their debts in 2005. That compares with an estimated 45,000 who were declared bankrupt.
IVAs have become increasingly popular in recent years as creditors believe they offer a greater chance of recouping their money than bankruptcies. But analysis by KPMG shows the average IVA debtor owes Pounds 60,000 and creditors are expected to get only 38% of this sum. That means at least Pounds 600 million will have to be written off.
The surge in IVAs comes after a long-running borrowing binge with millions racking up debts they could not afford to repay.
Britain's household debt mountain topped Pounds 1 trillion last summer - and is still growing.
Steve Treharne, head of personal insolvency at KPMG, said: " Typically the sorts of debt we are talking about here are personal loans, credit card balances and other forms of 'buy now, pay later' unsecured loans. Given the average level of debt, too many people are borrowing money they have no realistic hope of repaying."
However, separate figures published today suggested consumers are heeding the warnings and becoming more responsible with their finances.
The British Bankers' Association said consumer credit - borrowing on credit and store cards, loans and overdrafts - rose by Pounds 6.4 billion last year, a sharp fall from Pounds 11.4 billion in 2004.
Meanwhile, the Building Societies Association said consumers squirrelled away Pounds 9.7 billion in savings accounts last year, the highest amount since 1997. …