With the government's personal insolvency figures due to be released on Friday, the accountancy practice is expecting to see a further rise in the numbers forced into bankruptcy or applying for an IVA.
PKF partner, Philip Long, fears that the signs of future hard times for many are already apparent and that 2008 insolvency numbers are likely to rocket. He said: "We have been helping an increasing number of people who have been using their credit cards to pay their mortgages, which is a mark of extreme desperation given the speed with which the level of debt mounts up. It's an unsustainable practice and a sign that many are standing on the precipice and only relatively small additional costs will push them over the edge.
"Personal insolvencies in England and Wales peaked at just under 30,000 in the last quarter of 2006 and the first quarter of 2007 but the likelihood is that the ceiling will be breached in the first quarter of next year. I anticipate the numbers will continue to rise steadily throughout the year.
"It will not be much of a comfort to those facing this position, but a hard dose of reality in the personal credit market is long overdue. It's deplorable that it's taken a meltdown in the U.S. sub-prime mortgage market for lenders to review their loans and credit policies but it is essential that it happens. It's going to mean short-term pain but unrealistic lending practices had to stop at some point; hopefully this is it.
"The tightening of lending criteria will undoubtedly cause the insolvency figures to rise significantly as those in the worst financial positions won't be able to carry on. It's a very hard lesson for the UK to learn but it's essential that it is taken on board. Everyone has to understand that there is a cost for credit.
"We have to help the thousands of people in debt and part of that is removing the stigma of bankruptcy for the current generation. There is life after bankruptcy and people have to view it as the start of rebuilding their lives. That's a very difficult message to take on board for someone who might have lost their home but it's the reality created by over a decade of spending on credit."
