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A statutory demand is a formal demand for payment which is issued by a creditor who is owed money. A statutory demand can be served on a company or an individual. This information relates to statutory demands served on individuals. For statutory demands served on companies you can access the relevant information here. Once a statutory demand is served on a debtor, they have 21 days to satisfy the debt (if it is not disputed) or 18 days to apply to court to set the statutory demand aside.

A statutory demand is the first step a creditor will take to enforce a debt owed to them by an individual. If a debtor owes £5,000 or more and fails to make a payment to settle the debt or make an application to court to have the statutory demand set aside then the creditor will be able to use the statutory demand as evidence that the debtor is unable to pay their debts and therefore a bankruptcy petition can be presented.

The debtor who has been served with the statutory demand can apply to court to set aside the statutory demand if the debt is genuinely disputed or the debtor has a counterclaim against the creditor which reduces the debt owed to the creditor to an amount which is below the bankruptcy threshold (£5,000). The court will apply the same test when determining whether a debt is disputed as they would do when a petition is being contested or an application is being made to annul a bankruptcy order. The test is essentially whether there is a triable issue in respect of the debt.

Edwin Coe’s dedicated team of personal insolvency experts are ranked in Chambers Band 1 for personal insolvency and are experienced in all aspects of statutory demands including acting for individuals who have been served with a statutory demand and wish to apply to set it aside or for debtors who are taking steps to enforce debts owed to them by issuing a statutory demand and subsequently having to defend an application by the debtor to set their statutory demand aside.

Services we offer in this area include:

 

  • Acting for companies, individuals and IPs who wish to enforce a debt owed to them by an individual by presenting a statutory demand.
  • Acting for individuals who have been served with a statutory demand to include advising them of their options if the debt is not disputed or alternatively preparing and issuing applications to court to set aside the statutory demands.
  • Acting for companies, individuals and IPs who have issued a statutory demand which is subsequently the subject of an application to court to set it aside.
  • Advising on all other personal insolvency options such as IVAs or bankruptcy.

Should you require any assistance in either issuing or applying to set aside a statutory demand, call our team today for an informal and no obligation discussion.

  • Acting for a company seeking to recover payment of a sum advanced by them to a company and personally guaranteed by the director. A statutory demand was issued and then subsequently a bankruptcy petition was presented.
  • Acting for an individual who had been served with a statutory demand. Drafting an application to set aside the demand due to a dispute regarding the underlying debt. Our application was ultimately successful and the statutory demand was set aside at a court hearing.

Key Information

  • How do I respond to a statutory demand?

    You have 21 days to respond to a statutory demand so it is important to take action as soon as you have been served with the demand. You can:

    • Pay all of the debt and request that the creditor confirms that the statutory demand has been withdrawn.
    • If you can only pay part of the debt then you can contact the creditor and request that you enter into some kind of repayment plan.
    • If you dispute the debt then you need to make an application to court within 18 days from the date of service of the petition on you. This application must be accompanied by supporting evidence which shows why the debt is genuinely disputed on substantial grounds.
  • Contents of a statutory demand

    A statutory demand must:

    • Comply with the necessary statutory provisions set out in the Insolvency (England and Wales) Rules 2016.
    • Identify the creditor and the debtor.
    • Provide details of the debt, any consideration for it and how it arose.
    • Provide details of any interest or other charges that are accruing.

    Once the statutory demand has been drafted to include all of the above information, it can be served on the debtor. A statutory demand is not issued by a court.

  • What happens if I do not respond to a statutory demand?

    You have 21 days to respond to a statutory demand. If you have failed to take action before this deadline then the creditor who has served the petition can proceed to present a bankruptcy petition against you to start the proceedings to make you bankrupt. It is therefore important that you do not ignore a statutory demand if you are served with one.

  • Grounds for applying to set aside a statutory demand

    If you do not agree that the debt set out in the statutory demand is due then you are able to make an application to court to set aside the statutory demand. The grounds for making such an application are:

    • The debt is genuinely disputed on substantial grounds.
    • The debtor has a counterclaim against the creditor which brings the debt owed below the bankruptcy threshold of £5,000.
    • The service of statutory demand appears to be an abuse of process, for example, because the debt is disputed or because the creditor is using the statutory demand as a means of exerting pressure on the debtor to do something which they are unwilling to do.

    You have 18 days from the date that the statutory demand was served to make an application to court and once the application has been made, the time for complying with the demand stops until the application is determined or dismissed.

  • Who attends a hearing to set aside a statutory demand?

    At the hearing of the application to set aside a statutory demand the debtor can instruct solicitors and Counsel to appear on their behalf to make their case against the creditor. The debtor themselves will not have to attend the hearing unless they want to.

  • What may happen at a hearing to set aside a statutory demand?

    At the hearing of the application the court will determine if the application is to be granted and the statutory demand will be set aside or if the application will be dismissed.

    If the application is granted then the creditor will not be able to rely on statutory demand. They may, however, start Part 7 proceedings against the debtor to try to recover the debt they claim is owed that way.

    If the application is dismissed, then the court will set out directions which will specify when the creditor will be able to present a bankruptcy petition. It will then be up to the creditor to decide whether they want to go ahead and present a petition.

Contact our Restructuring & Insolvency Team
telephone: 020 7691 4000
or email: enquiries@edwincoe.com

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Restructuring & Insolvency

Statutory Demands

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