Every four minutes a family are being made bankrupt as the credit crunch forces more cash-strapped families into debt, experts warned yesterday. The rise is fuelled by soaring household bills, poor pay rises and a lack of cheap loans.

It is predicted that at least 130,000 Britons will lose their battle with debt this year - a record breaking 355 a day or one every four minutes.

Figures released by the Insolvency Service recently showed 25,264 insolvencies between January and March. These figures are expected to be the "calm before the storm" with numbers set to increase significantly in 2009. Many people are struggling with debt at the moment and may not reach the point of insolvency for another twelve months or so.

The average debt of someone taking out an IVA is nearly £50,000 excluding their mortgage with many having debts in excess of £100,000 mainly on credit cards and personal loans. The money has been frittered away and they have borrowed on one credit card to pay the bill on another. The credit crunch has meant that this is no longer possible or if it is, it is much more expensive than it used to be.

In the past, remortgaging property or extended limits on credit cards has been a way of avoiding bankruptcy but with these options no longer available insolvency proceedings have become a reality much quicker.

The number of companies becoming insolvent has also risen by 54% in the first three months of the year. Over 850 companies in England and Wales went into administration compared to 557 in the previous quarter.

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