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What is a Statutory Demand?
A Statutory Demand is a formal legal notice served to a debtor from the creditor to settle the debt owed within 21 days else a bankruptcy petition will be issued. A statutory demand should be seen as a real wake up call to debt problems.
You must treat a statutory demand as a matter of urgency. Especially if the person/business behind the demand:
- Is willing and able to take you to court to recover the debt
- Is upset with you and the threat is more emotionally based than financial
- Knows that the attempt to make you bankrupt will affect your professional reputation (all bankruptcy hearings are public knowledge, regardless of outcome)
To Prevent a Statutory Demand Escalating to a Bankruptcy Petition
- Reduce the debt owed to the creditor to below £750 (The legal minimum amount owed that can result in a bankruptcy order)
- Apply for the demand to be set aside but only if you have proper grounds
- Make an offer to settle or compound the debt to the creditors’ satisfaction e.g. offering some security
How to Set Aside a Statutory Demand
It is important this is done within 18 days of the statutory demand being served. Proof will be required to dispute the amount owing and will only apply if the dispute will reduce the value of the debt to below £750. Other ways to set aside the demand notice:
- The Creditor serving the demand holds security/assets of yours that are equal to or worth more than the claim
- The amount owed is below £750
- The person served the statutory demand owes you money amounting to the same value or more than they are claiming from you also - this is called a counterclaim or set off and there must be a Trial issue between you
- The demand is served in error
- The creditor failed to comply with the rules - such as the delivery of the statutory demand. Though in this case the court will usually allow the demand to stand unless there has been any real prejudice or injustice.
Forms to set aside a statutory demand can be obtained below directly from the insolvency website.
A Statutory Demand is sent by some creditors to frighten debtors but they should always be taken seriously. In particular a statutory demand issued for VAT by HM Customs & Excise should be regarded as putting the debtor in extreme financial danger.
If You Need Further Help
If you are unable to make the payments requested you may need help to negotiate with your creditors to achieve a level of repayment you can afford.
Contact the free debt advice line on 0845 055 8152 for further information
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