Statutory Demand

I have set out below what I hope is useful and helpful detailed information if you have been served with a Statutory Demand.  If you are considering using this as a method of enforcement I have done an article which can be found here.  Also I have set out more relevant notes on our debt recovery pages.

A Statutory Demand is a formal demand for money due and it is usually the first step in making someone bankrupt.  In order for a creditor to rely on a Statutory Demand the debt owed must be at least £750. 

A Statutory Demand should, whenever possible, be personally served on an individual, usually by a process server who will visit your home, or place of business, and hand the Statutory Demand to you directly.  Sometimes creditors will send a Statutory Demand through the post and I have even seen them faxed or emailed.  Whilst these are unconventional methods of service, it is not safe to ignore them and a Statutory Demand, however received, should be acted upon.

If the money claimed by the creditor is due and owing, then it is important to try to reach some agreement with the creditor about how the debt can be paid, or if some security can be offered for the debt.  Remember that in most cases a creditor will not want to make a debtor bankrupt because it can be an expensive business and there is no guarantee that the debtor will have the money to repay the costs and expenses of the bankruptcy, or to pay the debt to the creditor, especially if the debtor owes money to lots of other people.

A Statutory Demand can be used as an alternative to commencing proceedings through the Court, or it may be used as a method of enforcement for a creditor who already has a Judgment which has been unpaid.

If the Statutory Demand follows a Judgment given by the Court, then it may be difficult to challenge the validity of the Statutory Demand even if the Judgment was obtained by default but if the Statutory Demand is being used as an alternative to issuing proceedings through the Court, then the debtor may be able to challenge the debt claimed by the creditor, either completely or at least in part.  If the debt is disputed  then there is a mechanism for setting aside a Statutory Demand and the debtor must apply to their local bankruptcy Court to have the Statutory Demand set aside.  This application should be made within 18 days of the Demand being served on the debtor although, if the debtor fails to get the application in within this time, the Court may still accept it if no bankruptcy proceedings have actually been commenced.  If the debtor does nothing, the creditor has only to wait for 21 days from service of the Demand on the debtor to be able to present a bankruptcy Petition.  An application to set aside a Statutory Demand must explain why the debt has not been paid and why it is disputed.  It is not sufficient for a debtor to say that they admit they owe some money but not all of the debt because if they admit a debt of more than £750, then the creditor can still issue a bankruptcy Petition in respect of the part of the debt which is admitted but unpaid.

Sometimes a debtor will refuse to pay the whole of a debt because a creditor is not taking seriously a complaint that they may have about part of the debt but, unfortunately, this is likely to lead to potentially serious consequences and the presentation of a bankruptcy Petition for the undisputed debt.  It is important therefore that Statutory Demands are viewed seriously and,  where they are disputed, an application should be made at the earliest possible opportunity to have the Demand set aside.  Once the application has been made it will be listed for hearing and the creditor will have an opportunity of responding to the application and supporting witness Statement.  At that stage it may be possible to reach agreement with the creditor, particularly where no Judgment has already been obtained and the creditor may accept that there is a genuine dispute and that it is unreasonable to pursue the matter by service of a Statutory Demand.  If that is the case, then they can withdraw the Statutory Demand, although they should normally pay the debtor's costs of making the application to set the Demand aside and the creditor is then free to commence proceedings through the Court which can be defended in the usual way.

If a creditor is not willing to withdraw their Statutory Demand, then the Court will decide at a hearing whether or not it is appropriate for the Demand to be relied upon, or whether it should be set aside.  It is not the role of the Court at that stage to decide on the merits of the dispute and a Court does not have to be satisfied that the debtor will win their case, merely that there is a genuine dispute.  This is the debtor's opportunity to challenge the debt and either give themselves a chance of defending any action which may be brought through the Courts, or of resolving matters with the creditor.

If the debtor's application is successful and the Demand is set aside following a Court hearing then it may be possible to recover the costs of that application and hearing from the creditor.

The above is a general guide to this topic.  Your situation is individual to you.  You require specialist advice tailored to your needs.  There is no substitute for this.  Contact me now to see how I can help you and to arrange an initial meeting to discuss your individual needs.  Telephone me on freephone 0800 083 0815 or email fiona.gaskell@clough-willis.co.uk Click here to view my profile