Creditors have written off a record amount of personal debt in the UK as more and more people get into financial trouble, a report has said.
Many consumers are living beyond their means, and racking up debts
According to accountants KPMG, £1.4bn of bad debts were written off this year after people signed up for Individual Voluntary Arrangements (IVAs).
Also this year, about 110,000 people became insolvent, topping the 100,000 mark for the first time, KPMG said.
Consumer groups have warned that debt levels have risen to dangerous levels.
Earlier this year government figures showed that the number of personal bankruptcies had declined as more consumers signed up for IVAs, which allow people with debts to work out a repayment plan with their creditors.
KPMG said that a person entering into an IVA on average owed £52,000 and was proposing to repay 39% of the outstanding debt.
It also estimated that about 3,000 people went into an IVA this year with debts of more than £100,000, while some consumers as young as 21 were running up debts of more than three times their annual incomes.
"Typically the sorts of debts we have seen being dealt with by IVAs in 2006 are personal loans, credit card balances and other forms of 'buy now, pay later' unsecured loans," said Steve Treharne of KPMG.
"Most of the money is borrowed to meet current expenditure - including lifestyle items such as holidays - rather than to acquire assets or to fund a business," he added.
"Too many people have debts that they have no realistic hope of repaying."
The rise in IVAs has been controversial.
Critics claim that IVAs are heavily marketed by firms that stand to earn a fee once an agreement is reached, and are often sold to people who would be better off either going bankrupt or making an informal agreement with creditors.
IVA providers argue that they have been reacting to consumer need and have not been selling the IVA concept inappropriately.
Mr Treharne said: "Although the government has made it clear that it has no plans at this stage to strengthen regulation, several steps have recently been taken to address these concerns."
These measures include "a new body to perform a representative function for leading providers of IVA advice and the possible introduction of licensing specifically for insolvency practitioners specialising in personal insolvency".
"It is essential that all involved continue open dialogue about the solutions which are to be offered to the increasing number of consumers struggling to manage their debts," Mr Treharne said.