When someone owes you money (or vice versa), things can get heated quickly which is why there are certain legal processes in place to ensure that arrears are paid back. One particular process is called a statutory demand, and this article is going to explain that process in full.
Whether you are going to send out a statutory demand or you are on the receiving end of one, you should have a full understanding of what it means.
Statutory demand meaning
When a creditor wants to be repaid, they can send the person they lent money to a formal written request for payment using a standard form (form SD, otherwise known as a statutory demand). The demand will state that if the debt is not paid or another agreement is not reached, then insolvency proceedings will begin.
That is the main point of statutory demands – that if the debts are not repaid, the creditor can then advance with court proceedings in order to have the other party declared insolvent.
If the debts are not paid, in full, within 21 days of the statutory demand being served, the creditor can then apply to begin bankruptcy proceedings.
Setting aside statutory demands
If you have been served a statutory demand but you think that it can be challenged (perhaps you do not owe the money), you can apply to have the statutory demand cancelled (or, as it is called, set aside). If you take this route, you must apply to set aside a statutory demand within 18 days of the demand being served.
What are the grounds for setting aside a statutory demand?
The grounds for setting aside a statutory demand are often far more complex than simply not believing money is owed. Here are a few common grounds:
- You already have a claim against the creditor for an amount of money that is equal to or more than the debt in question
- The debt in question is secured against property that is equal to or more than the debt
- The whole debt (or at least the unsecured part of the debt) is below £5,000 (or in the case of a company £750)
- The debt has been disputed and the court believes that there are reasonable and substantial grounds for dispute
- Ultimately, the court is satisfied that the demand should be set aside. Perhaps the debt was subject to instalments which you kept up with
Making an application to set aside a statutory demand
Again, remember that it must be made within 18 days of the statutory demand being served. We would certainly suggest that you seek legal advice as soon as possible and our team would be able to help. However, here’s what you’ll need to do:
- Apply to the correct court (it will be named on your statutory demand). You can check here – select ‘the area of law I am interested in, select ‘bankruptcy’, then enter your postcode.
- Download and complete the application form, which you can find here
- Attend your hearing. Once a date is set, you must attend – if you miss it, your application to set aside the statutory demand will be dismissed. If this happens, your creditor can then apply to make you bankrupt immediately. There may also be court costs if your application is dismissed.
What if the statutory demand cannot be set aside?
If the above fails, you have a few options.
- Pay in full. If the statutory demand has been proven legible, then the simplest solution is to pay in full.
- Offer to pay in instalments. The creditor can accept instalments which may be a more affordable solution for you.
- Ask the creditor to write off the debt. Unless you have no income or belongings of value, this does not often work. For it to be successful, the creditor needs to understand that they would have nothing or very little to gain by taking legal action.
- Offer your property against the debt. If you own property, you could offer the creditor security on it which then can be held against your debt. In the future, when the property is sold, the debt will be taken from the proceeds
- Set up an IVA (individual voluntary arrangement). As an alternative to bankruptcy, you can set up an IVA which is a legally binding agreement that sees you pay your creditors over an agreed period of time.
- Reduce the debts to under £5,000 to avoid bankruptcy or £750 if it is a company debt. You cannot be made bankrupt if you owe below £5,000. A winding up petition cannot be commenced for debt of less than £750.
- Accept bankruptcy or winding up. Sometimes, it is just the better option. Remember that it doesn’t have to be forever.
Serving a statutory demand
If you want to serve a statutory demand to recover debts owed to you, we can help. Take the below steps to start the process.
- Write to the debtor, and establish that there is no reason for the non-payment. Identify the invoice and attach a copy, including the amount due plus any interest, and the date the payment was due. State that they have a finite amount of time to pay, after which a statutory demand will be served.
- If you have no response, fill out a form for a debt immediately payable. You can find the form here. If you’re sending the statutory demand to a registered company, you can find their address on the Companies House website.
- If, after the 21 days has passed and you’ve not had a response then the next step is to apply for a bankruptcy or winding-up petition, a process which more often than not requires solicitors. You can find more winding-up information provided by the government here.
Whether you owe money or are owed, we can help
Whichever side you’re on, our team of dispute resolution solicitors can help with our years of experience in statutory demand cases. You can contact us here, as well as at our Manchester office and Warrington office.
In the meantime, keep an eye on our blog section as it’s regularly updated and has plenty of helpful tips for you.