Statutory Demand: What is it and How will I respond?

This Guide is only Accessible if You’re Living in England, Wales and Northern Ireland

If your creditor or lender plan to apply for your bankruptcy, they’ll send you a statutory demand. The Insolvency Legislation regulates the format of the demand and the guidelines on how your creditor should serve it. However, you should know that this is not one of the court document.

A statutory demand is issued by the creditor as a conformation whether you can afford to pay a debt. Your creditor will use the statutory demand and your response as proof that you’re unable to pay your debts if they apply for your bankruptcy. This means, you must settle your debts right away if you don’t want to be bankrupt.

If ever you get a statutory demand, do not panic and exaggerate, contact us so we can help you deal with the situation.

How long is it valid?

The creditor has four months to apply for your bankruptcy if you do not comply with a statutory demand. If they’ll use a statutory demand that is over four months, they may need to ask permission to the court.

Can a statutory demand affect your credit report?

Statutory demand will not harm your credit file since this won’t be recorded. However, once you’re declared bankrupt, this will be registered on your credit file. You can check our guide on: Impact of Bankruptcy on my Credit Rating and How Does Debts Affect My Credit Record?

How to determine a statutory demand?

It is a document form that contains details about your debts. The form is usually served or delivered to you in person. This means your creditor or an agent acting on your creditor’s behalf will hand the form to you personally.

Alternatively, this can be sent via post but only when serving it personally was unsuccessful. Besides, for debts regulated by the Consumer Credit Act, you’ll get a default notice since your creditor must have defaulted your account before issuing a statutory demand.

How should I respond to a demand?

You can respond to a statutory demand in three ways:

Complying with the demand

In response to a statutory demand, you can either pay off your debts or settle for an arrangement with your creditors on how you can afford payments. You can either negotiate with your creditor to:

  • Pay the full amount
  • Pay through instalments
  • Offer a full and final settlement
  • Secure your debt against your home or any property that has value

You will have 21 days to comply before your creditor can petition for your bankruptcy.

Appeal to set aside or cancel

If you believe that the claim under the demand is inaccurate, you can appeal to the court to cancel it or set it aside

If you reside in England or Wales, you have to complete two forms that detail why you believed that the demand is incorrect.

You have to submit these completed forms to the High Court and include a copy of the demand if you’re able to retain one.

You have to submit these completed forms to the High Court and include a copy of the demand if you’re able to retain one. Also, some of the reasons in applying to cancel the demand may due to:

  • The amount of debt does not meet the bankruptcy limit which is £5,000
  • Your debt is currently on dispute
  • Debt on demand is treated as statute barred

Go on with your bankruptcy

If you’re fine to go on bankrupt as you find it favourable, you just have to do nothing. After issuing the demand, your creditor has four months to apply for your bankruptcy.

If going bankrupt is not what you wish for then, you might need to check your options to comply with it. Besides, it’s uncertain that your creditor will pursue your bankruptcy after the demand.

However, too much confidence and optimistic on this can put you at risks. The effects of bankruptcy are too severe that can impact all aspects of your personal, finance, and other areas of your well-being.

Additionally, should your creditor pursue in making you bankrupt, they’ll pay for the bankruptcy costs which will be added on your debt.

How We can Support

If you are served with a statutory demand or received a letter from your creditor regarding it, use our debt advice tool to get free and unbiased debt advice. You can also call us on  0800 193 1024.

We can support you in putting a realistic budget that implies the amount you can afford to pay off your debt. Besides, our debt experts can help determine the best alternatives to resolve your current circumstances.