A record number of people will be declared bankrupt or insolvent over the course of next year, according to accountancy firm KPMG.

UK payments association Apacs estimated that Brits will spend a record £53 billion this Christmas. This, along with tighter lending rules, has meant many borrowers will find it hard to manage financially next year, claimed KPMG.

Mark Sands, personal insolvency director for the firm, said: "Those in difficulty will find that their options are becoming limited – formal insolvency will for many be the only way out."

According to the research, over 130,000 borrowers are likely to enter into individual voluntary arrangements (IVAs) during 2008, compared to 110,000 the previous year.

Channel 4 News reports that £1.3 billion worth of debt was written off by creditors this year, as a result of people using IVAs.

This figure is lower than during 2006, where £1.4 billion of debt was cancelled out.