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What is bankruptcy

What is a statutory demand?

A statutory demand is a document which a creditor may send you if they’re planning to make you bankrupt. The format of the demand and how the creditor needs to serve it is set out in insolvency legislation. However the statutory demand is not a court document – it’s issued by the creditor.

The reason for sending a statutory demand is to confirm whether or not you can afford to pay a debt. If you can’t show that you can pay the debt, the creditor will use the statutory demand and your response as evidence that you can’t pay your debts if they apply to make you bankrupt.

If you don’t want to go bankrupt, you must act straight away. Never ignore a statutory demand.

Contact us for advice if you’ve had a statutory demand delivered, or if you’ve had a letter from a creditor telling you they’ve tried to deliver one.

How long is a statutory demand valid for?

If you don’t comply with a statutory demand or set it aside, the creditor has four months to petition for your bankruptcy. If a creditor wants to use a statutory demand that’s more than four months old, they’ll need the court’s permission.

Does a statutory demand affect your credit rating?

Statutory demands aren’t recorded on your credit file. When your bankruptcy terms have been confirmed by the official receiver, it’ll be recorded on your credit file.

How can I identify a statutory demand?

A statutory demand is a form which includes details of the debt you owe. See an example of a blank statutory demand here.

The forms will normally be delivered to, or ‘served’ on you in person. This means your creditor or an agent working on their behalf will visit you to hand you the form.

They can send the statutory demand by post, but only if they’ve tried to serve it in person and been unsuccessful.

For debts which are regulated by the Consumer Credit Act, the creditor must have defaulted the account before they can issue a statutory demand.

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How do I reply to a statutory demand?

There are three responses to a statutory demand:

Comply with the statutory demand

This means either paying it off, or making an arrangement to pay it. There are three ways you could comply with the statutory demand:

  • Pay off the debt in full
  • Make an agreement with the creditor to pay the debt off in instalments.
  • Agree with the creditor to secure the debt against your home or another asset – we strongly recommend you get legal advice before considering this

Although if you plan to comply with the statutory demand, you’ve got 21 days to do this before your creditor could start action to bankrupt you.

Apply to set aside the statutory demand

If you think the statutory demand is wrong you can apply to the court to have it cancelled or ‘set aside’.

If you live in England or Wales, you need to fill in two forms explaining the reasons why you think the demand is wrong:

If you live in Northern Ireland you need to fill in these two forms:

The forms will need to be submitted to the High Court, along with a copy of the statutory demand if you still have it.

The reasons for applying to set aside a statutory demand could include:

  • The debt is actually below the bankruptcy limit of £5,000
  • You’re in the middle of disputing the debt, for example you currently have a case being investigated by an ombudsman
  • The debt is statute barred

You can’t get a statutory demand set aside because of minor errors in the forms, because you’re in financial difficulties, or because you think the demand is unfair.

If you want to apply to set aside the statutory demand, you need to complete the forms and send copies to the court and to the creditor who sent you the demand. You have 18 days to do this. Contact us for debt help if you plan to do this as it can be complicated.

Do nothing

If you do nothing, your creditor may go on to make you bankrupt. They’ve got four months after the statutory demand to apply to the court for a bankruptcy petition.

If you don’t want to go bankrupt, then doing nothing is a bad idea. It’s not guaranteed that your creditor will start to make you bankrupt after the statutory demand, but it’s a significant risk. The effects of bankruptcy can be very serious, so don’t take any chances.

However, if you do want to go bankrupt, then doing nothing after a statutory demand might be a good idea – if your creditor goes on to make you bankrupt they’ll have to pay the costs of this instead of you paying.

How we can help you

If you’ve had a statutory demand served on you, or a creditor has written to you saying they’ve tried to deliver a statutory demand, use our online debt advice tool, or call our debt advisors (free from all landlines and mobiles).

We’ll help you work out what you can realistically afford to pay towards this and your other debts. We can also give you detailed advice on the effects of bankruptcy on you, and what steps you need to follow to deal with the statutory demand.