A statutory demand is a written notice demanding payment of a debt that you owe. If a statutory demand has been issued against you it indicates that the creditor intends to issue a bankruptcy petition if the debt is not paid. However it is not certain that this will happen.
There are strict rules surrounding how a statutory demand must be served on you. The person or company who is owed the money must take all reasonable steps to deliver the demand by hand to ensure that it is received.
What should you do if you receive a Statutory Demand?
If you have received a statutory demand, you have three weeks in which to respond to it. There are some different options you can consider depending on your circumstances:
1. Pay the amount owed in full
If you can afford to pay the debt and you agree that you owe it you should do this. After the creditor receives payment the matter will be settled and the demand dropped.
2. Come to an agreement with your creditor
Speak to the creditor you owe money to and come to an agreement to repay the debt over a sensible time period. A court will generally take a dim view if a creditor simply issues a statutory demand and then does not accept your reasonable offer of repayment.
BMD Tip: If you believe that you are making a reasonable offer to repay your debt (perhaps over a longer period) but your creditor is unwilling to agree to this then if they try to take further action the court may rule in your favour if you argue that the creditor has been unreasonable.
3. Present a counter claim to the court
If you believe that you do not owe the debt you can argue that it is not valid. If this is upheld by the court the statutory demand will be extinguished. The creditor will then be unable to take further action against you.
4. Start an Individual Voluntary Arrangement
If you are unable to make a reasonable offer of payment perhaps because you have other debts which you are also struggling to pay you should consider starting an Individual Voluntary Arrangement (IVA). This is a legally binding debt solution. If agreed the creditor who has issued the Statutory Demand will be legally bound and will be unable to take any further action against you.
Will a Statutory Demand result in a Bankruptcy Petition?
It is important to understand that the court views the service of a statutory demand as the first step towards allowing a bankruptcy petition to be issued against you. As such if you receive a statutory demand you must take this seriously.
However after the issue of a Statutory Demand the creditor does not have to petition for your Bankruptcy. If you are a home owner they could chose to secure their debt against your home with a Charging Order. Alternatively they could decide to agree a new offer of repayment that you make.
BMD Tip: If the creditor issues a statutory demand without trying and failed to collect their debt through the other standard collection procedures or there is a genuine dispute over the validity of the debt then the court will very often throw out the demand.
