Statutory Demands

When an individual or business owes a significant amount of debt to their creditors, a statutory demand may be issued to formally insist that the debts be paid. Statutory demands represent a significant legal step that should not be taken lightly. Failing to respond to a statutory demand can result in legal action and result in serious consequences for both creditors and debtors.

At Clough & Willis, our solicitors have specialist expertise in this area of the law, and can provide you with support, whether you are issuing a statutory demand or have received one. We can advise you throughout the entire process, help you to understand what actions to take and discuss how you can resolve the matter efficiently.

Disputes over debt can be damaging and acrimonious, potentially resulting in legal conflicts and bankruptcy. By getting the right legal advice, you will be able to come to an effective solution that works best for all of the parties involved. This can often be done without the need for court proceedings, providing you seek legal advice from our experts promptly.

To discuss the statutory demand process in a free, no-obligation chat with our lawyers in Bolton and Bury, call us on 0800 083 0815. Alternatively, fill out our online enquiry form and we will get back to you at a convenient time for you.

How we can help

At Clough & Willis, our expert statutory demand solicitors can advise you on everything you will need to consider when serving or receiving a statutory demand. We tailor our guidance to your specific needs and financial situation.

If you are a creditor issuing a statutory demand, we can provide advice on the following:

• The statutory demand process, including guidance on statutory demand thresholds and timescales
• Drafting a statutory demand with communication that is clear and precise
• Serving the statutory demand according to legal processes
• Further legal options if the statutory demand is ignored, or the debt cannot be repaid - including a bankruptcy petition or winding-up petition

If you are a debtor receiving a statutory demand, we can advise on the following:

• How to respond to the statutory demand - whether this means repaying the amount in full, a series of paid instalments or negotiating for a partial payment
• Disputing a statutory demand when there are legal grounds to do so
• The process to set aside the statutory demand, including the time limits and grounds for application

When a statutory demand is received, it is important to act quickly to acknowledge receipt and find a path forward. By getting in touch with a legal expert as soon as possible, it will be easier to make the right choice for your circumstances.

With offices based in Bolton and Bury, Clough & Willis has years of experience in helping individuals and businesses across the North West and further afield to effectively manage debt-related matters. We can provide you with the pragmatic advice you will need when dealing with a statutory demand.

What is a statutory demand?

A statutory demand is a formal demand issued by a creditor for the repayment of an outstanding debt.

Once issued, the debtor must pay off the owed money within a fixed time period, according to the terms of the demand. If they are unable to do so, they will be deemed to be unable to pay their debts, meaning they can be declared bankrupt, or have their business wound up.

The debt threshold for a statutory demand to be issued is generally £5000 for an individual, or £750 for a company.

A statutory demand can be used as an alternative to commencing proceedings through court, or as a method of enforcement for creditors who have already received a court judgment for an outstanding debt.

How long does a statutory demand last?

When a creditor serves a statutory demand, the debtor has a period of 21 days in which to respond, apply to set aside the demand or request that the creditor withdraws it. It is crucial to adhere to these time limits, as failing to do so can have serious financial consequences.

The debtor must either pay off the debt in full, or reach an agreement with the creditor to settle the amount, within this 21-day window. If this does not happen, or the demand does not receive a reply, the creditor can apply to bankrupt the debtor or wind up their company.

Who can serve a statutory demand?

Creditors who are owed more than £750 by a business can issue statutory demands. The demand will usually be personally served to an individual, usually by a process server who will visit their home or place of business to hand the demand over directly.

In some circumstances, creditors may also send a statutory demand through the post, via fax or by email.

Can I dispute, challenge, or set aside the statutory demand?

If the debtor wishes to dispute a statutory demand, they must first apply to their local bankruptcy court or county court as soon as possible to set aside the statutory demand. This application must explain why the debt has not been paid and why it is being disputed.

Once the application to set aside the statutory demand has been made, it will be listed for hearing. The creditor will have an opportunity to respond to the application and any supporting witness statements. If a creditor is not willing to withdraw their statutory demand, the court will hold a hearing to decide whether or not it is appropriate for the demand to be relied upon or set aside.

The hearing will provide an opportunity for the debtor to challenge the debt and defend against any action that may be brought through the courts, or to find another way of resolving matters with the creditor. As such, it is best to seek guidance from a solicitor before beginning the process of disputing a statutory demand.

If the statutory demand is successfully set aside, the court may order the creditor to pay the debtor's legal costs. However, this process is not always successful and you should work with a solicitor to give yourself the best chance of success.

What happens if debtors do not respond to statutory demands?

There are several further steps that creditors can take if debtors do not respond to statutory demands. For example, if an individual debtor fails to respond, the creditor may file a bankruptcy petition against them. This initiates bankruptcy proceedings which can result in the debtors’ assets being liquidated in order to cover the debt owed.

If the debtor is a company and the debt is at least £750, the creditor can file a petition to wind up the company. This process, also known as compulsory liquidation, involves submitting a winding-up petition to the court. If successful, the company’s assets will be sold off to pay creditors. Depending on the nature of the debt owed, this may be the most efficient method of debt recovery. However, in insolvency proceedings, debts are paid in a specific order:

• Secured creditors
• Fees for administrators or liquidators
• Preferential creditors
• Secondary preferential creditors
• Unsecured creditors

As such, negotiating with the debtor over the monies owed and implementing a payment plan may be a more effective approach. The team at Clough & Willis offers a personal service tailored to your individual needs. Discuss your circumstances with us for specific advice on debt recovery options, and we will guide you towards the best possible outcome.