Statutory Demands
In speaking with a few people these past few days many have come to me asking advice regarding a statutory demand notice they received. They were confused as to what the notice was and what it meant to them.
A statutory demand is a formal notice sent to someone by a creditor or someone who is owed money. It is a formal notice to the borrower or debtor that there is a debt owed and the creditor intends to try and collect this debt; this even though they may have sent out other collection notices and phone calls.
The person or company receiving the notice has 21 days to settle the debt, or 18 days to attempt and get the court to set aside the claim.
If after this 21 days the debt is not set aside or settled, the creditor can move forward with making the borrower/debtor bankrupt, if the debt exceeds £750.
In many instances the borrower who receives the statutory demand works out a suitable repayment arrangement with the creditor to avoid being made bankrupt. This can be some informal arrangement made between the borrower and creditor, or a more formal arrangement made using the assistance of a third party.
Just because you are sent a statutory demand and don't settle the debt within the 21 day period doesn't mean you will be made bankrupt. It just means the creditor can move forward with bankruptcy as a means to collect the debt. It may not be in the creditor's best interest to make someone bankrupt for a variety of reasons. It may be the borrower has no assets such as property, in which case using bailiffs may be a better alternative to collect the debt.
Statutory demands technically do not expire, however if a creditor has not proceeded with bankruptcy within four (4) months of serving the demand, they may need to explain this to the courts. And if too much time has passed with no bankruptcy proceedings, a new statutory demand may be required to be sent out.
Hopefully this little look at statutory demands will give you a better idea of what they are all about. More detailed information can be found on the government's insolvency web site.
