What do I do if I receive a Statutory Demand?

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If you receive a statutory demand it is important that you deal with it immediately. If you don’t, and the debt is for £750 or more, a court could end up making you bankrupt or your company could be wound up. You have to comply with the statutory demand within 21 days and  you have three options:

  • Settle the debt – pay what you owe
  • ‘Secure’ the debt – reach an agreement for payment
  • Dispute the debt if you believe you have good reason to. This is called ‘setting aside’ the demand

Before you take any action, you should consider taking legal advice. If you accept that there is a debt but do not have the money to pay, try to keep talking to the person or company to whom you owe the money. It is generally better to negotiate than to face a bankruptcy or winding-up petition.

Although statutory demands are relatively cheap to issue, winding up proceedings in court are much more expensive. People you owe money to are almost always better off doing a deal for lower payment/payment by instalments than getting a much lower net recovery if you’re made bankrupt or if your company is liquidated.

If the debt is for £750 or more and you don’t settle, secure or set aside the debt, the person/company that you owe money to can take further action. Statutory demands are a powerful tool and you should treat them seriously.

If you owe the money as an individual your creditor can apply for a bankruptcy order. If this is successful you could lose your home (if you own it) and many of your other assets may be sold to repay the debts you have. It may also affect your job, particularly if you work in the financial services industry or you are the director of a company.

If you owe the money as a company your creditor can apply for a winding-up order. This is the case even if you have thousands or millions of pounds in your company current account. This petition will be advertised in the London Gazette and shall be picked up by your company’s bankers. They will automatically freeze your company bank account which will in effect render your company unable to trade.

A winding-up petition is normally issued to your registered address and if you don’t responded to it or defend it, the court will issue a winding-up order. The Official Receiver will be appointed liquidator of your company and has a statutory obligation to investigate the company affairs including the conduct of directors.

If you disagree with the statutory demand as an individual, you have 18 days from the date the statutory demand is served on you to apply to the court to have the demand set aside. If you live abroad, then the time limit for setting aside the demand is 22 days.

A court will only grant your application to set aside a statutory demand if there is a genuine dispute about whether the debt exists. A mistake in the statutory demand about the amount owed will not make it invalid. 

Money Helper (formerly The Money Advice Service) is a free service set up by the Government to help people make the most of their money. If you would like to learn more click here.

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