What if I receive a statutory demand?
What is a statutory demand?
A statutory demand is a written demand for payment. Presenting 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.
What if I cannot pay the debt in full 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, including 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 (in so far as possible) 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.
Entering into an IVA
An individual voluntary arrangement is a contractual agreement between a debtor and their unsecured creditors for a composition to satisfy their debts. It is an alternative formal insolvency procedure to bankruptcy. The terms of an IVA will usually permit a debtor to pay in instalments or a proportion of the debt owed to creditors or serve as a formal arrangement in relation to the debtor’s assets. An IVA can only be approved where 75% or more (in value) of creditors approve its terms. We strongly recommend that you seek specialist advice before agreeing to an IVA.
Offering security over property
If you are able, you could offer your creditor security over your property to satisfy the debt in the form of a voluntary charge. This means that once your property is sold in the future, the debt will be satisfied from the proceeds of sale. We strongly recommend that you seek specialist advice before agreeing to a voluntary charge.
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).
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.
- 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.
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.
Our specialist insolvency team at Summit Law have considerable experience dealing with statutory demand claims. Contact our specialist team today on 020 7467 3980 or email@example.com or firstname.lastname@example.org