The number of consumers becoming insolvent is expected to soar next year after figures published yesterday showed rising bankruptcies and a fall in the use of arrangements to avoid going bust.

Personal insolvencies overall fell in the third quarter by 3 per cent, and were 5 per cent lower than a year ago at 26,072, data from the Government’s Insolvency Service showed.

However, accountants said that the figures disguised the problems that are set to emerge in the consumer credit market, which will give people fewer means of combatting debt.

Individual voluntary arangements (IVAs), a form of insolvency that has gained popularity over the past decade, dropped by 14 per cent year-on-year. But the decline comes in the aftermath of an industry-wide squeeze by banks on IVA providers.

Steve Treharne, of KPMG, the accountant, said: “This is really a lull in the storm. The traditional ways that people can delay the impact of money worries such as a new credit card or a second charge on their home are gradually being closed off as a result of the credit crunch. This is now a plateau, but all the indicators are that consumers are in for a rough ride.”

IVAs, which allow debtors to freeze and sometimes reduce their debt while paying off a manageable sum each month, have been affected by a dispute between creditors and IVA companies. Some creditors believe the fees charged by IVA companies are too high, and have rejected large numbers of IVA applications. Nearly one in five IVA applications are rejected.

Several insolvency operators, including Debt Free Direct, the market leader, have been forced to issue profit warnings this year as banks withdraw their support.

John Hall, chief executive of personal debt solutions provider new-tomorrow.com, said: “These figures aren’t surprising and the underlying position is much worse than the figures suggest.

“There is a dam waiting to burst and the cracks are starting to appear. The reason the figures are not higher still is that lenders are making it more difficult for their customers to put a voluntary debt solution in place by insisting on unachievable repayment levels, resulting in significantly more house repossessions.”

Mr Treharne said: “According to the Council of Mortgage Lenders, the number of property repossessions is likely to rise by 50 per cent in 2008. If people struggling with debt lose their home they often give up and either go bankrupt or enter into an IVA.”

Although personal bankruptcies were down by 3 per cent in the third quarter compared with the previous three months, they rose by 2.2 per cent from a year earlier. Some 111,359 people went into bankruptcy or entered into an IVA in the year to the end of September, up 13 per cent year-on-year. Other data showed that about 3,100 companies went into liquidation in the third quarter of this year, nearly 3 per cent down on the number of company liquidations in the same period last year. The number of compulsory liquidations fell by 4 per cent, while voluntary liquidations fell by 2 per cent.

Mike Jervis, partner in the Business Recovery Services practice at PricewaterhouseCoopers, said: “Credit has been readily available to corporates until this summer and the downward trend in corporate insolvencies reflects this. However, while companies have so far avoided formal insolvency, less creditworthy corporates are finding that it is increasingly difficult to borrow at affordable rates in the current climate. There is still uncertainty as to how many businesses will fail as a result of the more restrictive credit environment.”

Ministry of Justice figures showed housing possession orders rose in the third quarter, to 23,800 from 23,000.