What is a Statutory Demand?
A Statutory Demand is a legal notice from a creditor giving 21 days to settle a debt of at least £5,000 otherwise, bankruptcy proceedings may follow.
Ignore a Statutory Demand at your peril! You may find yourself unexpectedly bankrupt.
The demand states the debt must be paid in full or by instalment, subject to terms acceptable to the creditor. The option to secure the debt on a property may also be offered. A creditor does not need an existing Court Order to issue a Statutory Demand.
If you don’t make a satisfactory response, the creditor can issue an application to the Court to grant a Bankruptcy Order.
Some creditors may use a statutory demand as scare tactic without the intention of pursuing bankruptcy. However, do not ignore a Statutory Demand as you may find yourself bankrupt.
The creditor issuing the demand has done so at some cost believing you can pay the debt plus any fees, for example, you:
- Have access to enough funds.
- Are a homeowner with enough equity in your property.
- Have other assets that could be seized to cover the debt.
I’ve Received A Statutory Demand – What Should I Do?
You options are: –
Pay the debt in full
If you accept that you owe the debt and you can afford it, you should pay the debt in full.
Offer to pay by instalments
Your creditor may accept an offer to pay off the debt by instalments. They will prefer this as they’d probably receive more money this way than they would by making you bankrupt.
Ask your creditor to write off the debt
If you have no income nor another way of paying, you should explain this. You could request they write off your debt. They may decide against further action if they think they’d have little or nothing to gain.
Offer security on your property against the debt
If you own your home or other property, you could offer the creditor security on it to be held against your debt. When your home sells in the future, your debts are paid from the proceeds. This is called a voluntary charge.
Set up an individual voluntary arrangement
If you have valuable assets or a regular income that could be used to pay your creditors, you could ask to set up an Individual Voluntary Arrangement (IVA) as an alternative to bankruptcy.
Reduce the amount you owe to below £5,000
If you can make a payment towards your debt that reduces the amount you owe to below £5,000, your creditor can’t apply to make you bankrupt.
Get a personal guarantee
Get a personal guarantee for the debt from another person, such as a friend or relative; but ve careful, it could mean that your guarantor will be asked to pay some or all of the debt themselves
Accept that you don’t have a way of paying the debt and will be made bankrupt
This may be your only option, but you should not allow this to happen without taking professional advice.
If you do not agree with a statutory demand you’ve been given, you can apply to challenge it and get it ‘set aside’.
bankruptcy without a statutory demand
If a creditor has a county court judgment or other court order which they have been unable to enforce, for example by using bailiffs they can make you bankrupt without sending you a statutory demand first. Also, if you have set up an individual voluntary arrangement (IVA) to which has now failed, the insolvency practitioner or creditors can make you bankrupt without a statutory demand.