Statutory Demands

A statutory demand is a written demand for payment and is in a prescribed form. In other ways it is a kind of written warning from a creditor. It will state that if you do not pay your debt or come to another arrangement that is acceptable to the creditor, they may start court proceedings to make you bankrupt. It also contains various important warnings. If you receive or are served with a statutory demand you must act promptly.

Serving a statutory demand is often the first step taken by a creditor who intends to present a bankruptcy petition against an individual seeking to recover a debt in the sum of £5,000 or more. If the demand is not paid within 21 days, a creditor can petition for your bankruptcy. However, there is no obligation on a creditor who has served a statutory demand to commence insolvency proceedings.

A statutory demand must never be ignored because the recipient of the statutory demand will be deemed to be unable to pay the debt set out in the statutory demand, this being a ground for the court to make a bankruptcy order. The moment a bankruptcy order is made all the debtor’s assets will vest in the Official Receiver or a Trustee in Bankruptcy. Accordingly if you receive a statutory demand you must contact a solicitor urgently.

It is however possible to commence insolvency proceedings without first serving a statutory demand.

How can Summit Law help?

We fully appreciate that being in debt or facing a creditor’s claim can be stressful and tough at times, but it does not have to be that way. We will help devise options and strategies to enable you to make informed decisions at every turn.

What if I cannot pay the debt within 21 days?

If you do not dispute the debt but are not in a position to make payment in full within 21 days, there are various options available to you, and Summit Law can assist with the following:

  • Negotiating an informal agreement to pay in instalments. This should be done as soon as possible with your creditor and you should ensure you comply with the terms of any agreement reached.
  • Where possible, you should try and reduce the amount owed to under £5,000 so that a bankruptcy petition cannot be presented against you.

What if the debt is disputed?

If the debt claimed within the statutory demand is disputed, it is important to provide the creditor with details of the grounds of dispute or basis of any crossclaim as soon as possible. In practice, this is because a bankruptcy petition should not be presented against a debtor if the debt is genuinely disputed.

A disputed debt is also grounds to have the statutory demand set aside by the court (see below). Summit Law can consider the background facts and prepare an urgent application to set aside a statutory demand at the earliest opportunity. As you only have limited time you should call us today.

Application to set aside the statutory demand

It is possible to apply to set aside the statutory demand on the following grounds:

  • The debtor appears to have a counterclaim, set-off or cross demand which equals or exceeds the amount of the debt specified in the statutory demand. These are all grounds for contesting the service of a statutory demand.
  • The debt is disputed on grounds which appear to the court to be substantial.
  • It appears that the creditor holds some security in relation to the debt claimed by the demand, and either rule 10.1(9) IR 2016 is not complied with in relation to it, or the court is satisfied that the value of the security equals or exceeds the full amount of the debt.
  • The court is satisfied, on other grounds, that the demand ought to be set aside.

Time is of the essence

It is important to act quickly in relation to any set aside application as any application must be made within 18 days from the date the demand was served. Once a set aside application has been made, the time for complying with the demand ceases until the application is determined by the court or dismissed. The Court has jurisdiction to extend the time period for such application.

However it is always best in our experience to make the application within time. If an application is made within the 18 days, then the petitioner or creditor will not be able to issue a bankruptcy petition until the application to set aside has been determined. However the application to set aside the statutory demand must be detailed and it is highly advisable to put the application together with your solicitor who specialises in bankruptcy law.

Call our expert bankruptcy lawyers

At Summit Law, we offer all our prospective clients a free initial no-obligation telephone consultation, the intention of which is to discuss the background of your case and to offer an opportunity for us to get to know you and more importantly, for you to get to know us.

For more information, please contact our personal bankruptcy lawyers today by calling 020 7467 3980. Alternatively, you can complete the online enquiry form and a member of our team will call you back to discuss your situation. The above is only a general outline of this subject matter and should not be construed as amounting to legal advice. Every case will depend on its own facts.