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Adina-Leigh Collins

Article written by Adina-Leigh Collins, Litigation Solicitor

In this article, we look at statutory demands and what you can do if you are served one.

What is a statutory demand?

A statutory demand, to put it simply, is a written demand for payment of a debt. It is served on an individual as a precursor to bankruptcy proceedings, in accordance with section 268(1)(a) Insolvency Act 1986 and must contain the necessary information as prescribed by the Insolvency Rules 2016.

Can anyone serve a statutory demand for a debt?

The short answer here is no. A statutory demand can only be served on an individual or sole trader where:

  1. The debt is for a sum of £5,000 or more;
  2. The debt is for a liquidated sum (that is, it for a specific and final sum – for example, an unpaid invoice);
  3. The debt is a genuine debt that is not disputed; or
  4. The debt is not otherwise secured against an asset, for example, secured against a house.

I have been served with a Statutory Demand, what do I do?

  1. First check as to when and how the demand was served on you. This is crucial to determining the deadline by which you need to respond. The demand ought to state what you can do. Remember, you have 18 days from the date of service to issue an application to set it aside, or 21 days from the date of service in which to pay the demand. Do not forget to factor in time to post letters/applications etc. If in doubt, it is better to act as soon as possible.
  2. Double check the content of the demand and that it contains the information as required by the Insolvency Rules. In particular, the Court to which you should make your application to set aside the demand if you intend to do so. If there are minor errors, these may not be sufficient to really challenge the demand but if it is riddled with substantial errors to render it incomprehensible, then you may be able to challenge it on this basis alone.
  3. Fundamentally, check the debt that is alleged as being owed by you. Do you dispute it? What evidence do you have?
  4. If it is disputed, is all of it disputed or only some of it?
  5. If there is a disputed element, how much of it is disputed?
  6. Are you able to pay the undisputed element? This may prevent a bankruptcy petition from being presented if payment will reduce the overall sum to below the £5,000 threshold, but you should proceed with caution and seek legal advice where possible.

What if I dispute the debt?

If you have been served with a demand, it is important that you do not ignore it.

If the debt is substantially disputed then it is crucial that you put this in writing to the creditor, along with any evidence you have supporting your dispute, and to seek an undertaking from the creditor not to issue a petition. Be prepared that the creditor may not agree or not respond, therefore, you should allow sufficient time for you to make your application to Court to set aside the demand if necessary.

If the debt is partially disputed, then it may be an option to pay the undisputed element. If this reduces the amount to below the threshold of £5,000, then this will prevent a petition from being presented and it may help encourage discussions between you and the creditor regarding the disputed element to avoid alternative court action from being pursued.

And if I don’t dispute the debt?

If you do not dispute the debt but need time to pay, it may still be possible to agree a payment plan with the creditor to avoid a petition being issued against you.

What if I have lots of other debts?

It may be sensible for you to seek expert advice from an insolvency practitioner to discuss whether you are able to enter into an IVA – Individual Voluntary Arrangement, or some other debt management plan. We would be happy to recommend an insolvency practitioner or other regulated debt manager/adviser to assist you.

If you have been served with a demand or bankruptcy petition and would like advice on your position and legal options, please do not hesitate to contact me directly via email or contact our insolvency team on 020 8308 3610.