Creditors have a right to demand payment from you if you fall into debt. A statutory demand is a written demand by a creditor to repay a debt which is owed by an individual or a business.
A statutory demand is often issued after a creditor has tried on numerous occasions to try and recover the debt from you. It should be taken seriously and failure to do so could result in being served with a bankruptcy petition.
So, what happens when you get a statutory demand? How long do you have to respond to a statutory demand? What action should you take if you get a statutory demand? Find out the answers to these questions as well as more, by reading our comprehensive guide.
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What does it mean to get a statutory demand?
A statutory demand is a written demand made by a creditor to pay back a debt.
The debt must be at least £5,000 and contain information about your debt and how much you owe to your creditors.
You have 18 to 21 days to reply to a statutory demand letter. If you don’t then the creditors will see this as a confirmation that you are unable or not willing to pay your debt, which could then result in them issuing you a bankruptcy order.
A Statutory Demand works differently when you get it for a company or business. Please get further advice regarding this.
How long do I have to reply or act on a Statutory Demand?
You have 18 to 21 days to reply to the demand. The 18 to 21 days start from the date the demand was ‘served’ to you. When it means ‘served’ it means when it was delivered to you.
To ensure you get the statutory demand, your creditor should:
- Hand it to you personally
- Send it to you via first-class post (the demand starts usually two business days from the date of posting)
- Put it directly through your letterbox
How urgent is a Statutory Demand letter?
A statutory demand letter should be treated with the utmost urgency. The reason why your creditors give you up to 21 days to reply is that it will give you time to contact them and come up with an arrangement to pay the debt.
If you are not swift in getting the statutory demand sorted, then the creditor will assume you have no intention of paying back the debt and will proceed in other ways to recover the debt from you.
What should I do if I get a Statutory demand?
Getting a statutory demand letter can seem daunting, especially as it puts you at the risk of bankruptcy.
Bankruptcy can have a massive impact on your life by putting your assets at risk. It is best to agree to respond to the statutory demand as soon as possible as you technically only have 21 days to do so.
We have highlighted some of the options you can consider when you contact your creditors:
If you don’t have a budget already, create a budget which looks at your income and expenditure. Look at ways in which you can reduce your expenses and use that extra saving to consider paying back your debt to your creditors.
It is important to be realistic about how much you can afford as you don’t want it to start affecting your essential living costs.
Often, you may have already maximised how much saving you can make on your current expenditure, so another option would be to look at taking out a loan which allows you to consolidate your debt into an affordable monthly payment.
Debt solutions such as Individual Voluntary Arrangements (IVA) or Debt Relief Orders (DRO), offer ways in which you can pay your debts back. They all have their benefits and risks and you do have to check if you meet the eligibility criteria, so speak to one of our advisers if you want to find out more about these.
Whilst you are getting advice regarding these debts, you could be eligible to apply for the Breathing Space Scheme.
The Breathing Space Scheme can stop creditors from taking enforcement action or adding further interest to your debt for 60 days.
To find out more and whether you meet the eligibility criteria, look at our Breathing Space Scheme guide.
There might be a friend or family member who may be willing to take a personal guarantee of your debt on their behalf.
This can provide assurance to your creditor that someone is also guaranteeing that the debt will be repaid. However, it can be risky too, as the guarantor may be asked to pay some or all of the debt themselves.
You could pay off some of your debt and reduce it below the £5,000 mark. Lowering your debt to this amount will stop the risk of your creditor taking further action to make you bankrupt.
Your house is probably the most valuable asset so if you agree with your creditors to add a voluntary charge on your property then this offers a creditor a stable guarantee that you are serious about paying back your debt to them.
However, it is important that you do add some of your own clauses to the agreement, for example, they can’t sell the property and only you can do this. It is important to get professional advice regarding this matter.
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I don’t agree with the Statutory Demand. What should I do?
If you can’t agree to the Statutory Demand by the creditor, then you can apply for the courts to set aside your demand.
Setting aside a Statutory Demand means challenging what the creditors have asked regarding paying your debt.
What are the reasons for setting aside a Statutory Demand?
You can not set aside a Statutory demand because you simply want to. There does have to be grounds for the Statutory Demand to be disputed. Here are some of the reasons below:
- You don’t owe the creditors the money they claim you do
- They owe you money (this is a rare occasion, but it can happen)
- You have already agreed on a payment plan which you have been making the necessary payments for so there is no debt that needs to be paid to them. For example, if a court has agreed that you pay the debt in instalments and you have kept to them
- You have been sent the statutory demand as an administrative error
- The creditors have not followed the correct procedures when issuing you the Statutory Demand. For example, there have given you less time to respond to demand.
- The creditor has waited too long to pursue the debt and there is no signed agreement. This could mean the debt could be statute-barred.
- The debt or the unsecured part of the debt is below £5,000.
- Your debt is secured against your property which is more than the debt.
Why can’t set aside a Statutory Demand?
You can’t set aside a statutory demand because of:
- minor errors in the forms
- you are in financial difficulties
- you think the demand is unfair
- if your creditor has already a CCJ out against you. This is because the court judgement will be taken as proof that you owe the debt.
How do I apply to set aside a Statutory Demand?
If you want to apply to have your Statutory Demand set aside, then you will need to fill out two forms detailing the reasons why you dispute the demand:
What happens if you have missed the 18-day time limit to apply for setting aside your Statutory Demand?
You may still be able to apply for setting aside your Statutory Demand, even when you have missed the 18-day limit. If you have a good enough reason for your delay and your creditor has not issued a bankruptcy order yet, then it might be worthwhile trying.
You will need to add the following wording to your witness statement:
‘That to the best of my knowledge and belief, the creditor(s) named in the demand has/have not presented a petition against me. The reason for my failure to apply to set aside the demand within 18 days after service is as follows…’
What happens after you apply for the setting aside of your Statutory Agreement?
The court could either:
The reason for this could be that you don’t have the grounds to pursue the claim or that you have missed out on information from your application. Therefore it is vital to ensure that everything is included in the document when you send it off.
This does not mean that the court has accepted your claims. However, the court will set aside a date, time, and place for the hearing. They will also allow your creditors at least 5 working days’ notice regarding this hearing.
What happens if my hearing to set aside my Statutory Demand is rejected?
If your application is unsuccessful, then a creditor may make you bankrupt. They can do this after the 21 day serving notice has passed.
If a creditor delays the bankruptcy process by more than four months after they have served a Statutory Demand, then they will need to explain to the court why there has been a delay.
Does a Statutory Demand affect my credit rating?
Statutory demands are not recorded on your credit file however, if a creditor makes you bankrupt then this will be recorded on your credit file.
