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What to Do if You Receive a Personal Statutory Demand

The term ‘Statutory Demand’ is a formal demand for monies the creditor says you owe and should have paid, but which you have not paid. If you receive a Statutory Demand, then you must take this warning seriously and not ignore it. If you do the creditor will be entitled to petition for your bankruptcy. If you only engage after a bankruptcy petition has been issued you risk being ordered to pay the creditors costs, even if you have genuine grounds to dispute the debt and monies they say they are owed. A Statutory Demand should not be ignored– the impact can be serious.

A Statutory Demand is the first stage of a legal process, and although it is described as a demand, it is actually an official warning ahead of formal court bankruptcy proceedings being issued against you. 

A person to whom you owe money (or who says you owe them money) can serve a Statutory Demand- alleging they are a creditor. Standard wording is used within the Statutory Demand (if it is properly drafted) to put you on notice that monies are owed and if they are not paid the creditor will be applying to the court for an order you are insolvent (because you refused/failed to pay).

If the Statutory Demand is not dealt with the creditor can start proceedings in court to obtain a bankruptcy order against you. 

There is a time limit within which you must take action. This is usually 18 days from the date that you receive a Statutory Demand. Time is therefore short.

On being instructed, if we have sufficient time/if it is early enough in the 18 day period, we will typically initially review; 

  1. the underlying relationship and dispute and how (and when) the alleged debt accrued- whether you admit you owe these monies or whether you dispute these monies are owed. If you have genuine triable issues in dispute these can be reasons/grounds to set aside a statutory demand;
  2. whether you might admit these monies are owed, but claim that you are also owed monies yourself- this is technically known as a counterclaim. A counterclaim can be used to set off against monies due to a creditor; and/or
  3. whether the creditor has security for the debt.

Often a creditor might use a Statutory Demand as a threatening process designed to try to force a debtor to make payment, even where monies are disputed. 

  1. A Statutory Demand appears (and is) a legal and formal document. Receiving one can in itself be intimidating and can increase the pressure on a debtor to make payment, even where the monies are disputed. Creditors know this and can therefore use Statutory Demands as a tool to try to force a debtor to pay monies they don’t really accept they owe. We can prevent this from happening.

Your main options are broadly as follows:

Make an Application to Set Aside The Statutory Demand 

One of the options is to make an application to the court to set aside the Statutory Demand. The threshold in legal terms is fairly low to set aside a Statutory Demand and it can be possible to do so where there are genuine triable issues in dispute; where there is a counterclaim and/or right of set off; and/or where there is security for the debt. There can also be other more technical arguments for example where the incorrect form of notice/the content of the Statutory Demand is defective or incorrect. We review will all options in mind.

An application to set aside a statutory demand can be a useful tactical step for a debtor to take not least because we can seek recovery of the costs of the application by alleging the creditor should never have used the Statutory Demand process, or should have acted more reasonably and not continued it when we initially wrote to them to highlight the problems with their approach.

We look at technical aspects such as whether the money demanded in the Statutory Demand is time-barred. This means essentially that the alleged debt is too old, and too much time has passed between incurring the debt and when the Statutory Demand was served. If the time period to recover the money has passed, then the debt is known as ‘statute barred’ due to the limitation period having expired. In simple terms if a debt is disputed a creditor will not be able to take you to court to recover the money and cannot pursue insolvency via bankruptcy.

Debts such as credit card or other consumer debts can be sold in bulk. ‘Buyers’ buy the debt for pennies in the pound. They can then threaten debtors by using tools such as Statutory Demands in the hope debtors will pay. Some may but where we are instructed we consider if there are defences to the demand.

You may not owe the money and may dispute the debt. The legal test for a disputed debt is where there are genuine triable issues in dispute. If the monies are disputed they should not be pursued via insolvency, which is a process designed for those who ‘cannot pay’ (because they are insolvent) rather than for those who ‘will not pay’ (because they dispute the amount they are said to owe). If the debt within the Statutory Demand is disputed that can form the basis for an application to cancel the Statutory Demand. 

Whatever the grounds for your application, you will need to apply to the court within 18 days of the Statutory Demand being served; this process is described as ‘applying to set aside the demand but this will only happen if there are appropriate grounds, and your application is successful.  

Once you file an application to set aside a Statutory Demand, the clock stops ticking and the deadline for compliance with the demand (i.e. making payment) is suspended. If the debt is disputed, then you should take legal advice before you apply to the court not least to ensure your application has the best possible prospects of success. Where we are instructed to make an application to set aside we will also typically seek to recover our legal costs from the opponent.

Pay the Debt in Full

Payment of a demanded debt is one option, but won’t be attractive where the amount of the debt is disputed. 


Statutory Demands that are disputed rarely tell the full story. You have disputed some or all of the demanded money, or you may also be owed money.

As well as (and at the same time as) challenging a statutory demand we can/often will seek to negotiate a resolution with a creditor. Ultimately this can be important to avoid escalation in terms of court proceedings- your legal costs, and the creditors legal costs.

This is a good option if you essentially agree you owe the monies claimed, but you need some time to pay and cannot afford the full amount owed immediately.  

The creditor will need to accept your offer and agree a repayment schedule with you.  Many creditors are quite keen on this route as it offers them a more realistic chance of getting their money back than making someone bankrupt, but it can also be important to create some leverage- such as challenging the validity of the Statutory Demand or even the entire debt. 

If the debt is reduced to £5,000 or below, a creditor will not be able to apply to make you bankrupt. This can be another option with lower value Statutory Demands.

Individual Voluntary Arrangements

IVAs are an alternative option to bankruptcy. IVAs are a legally binding agreement for a debtor to pay the debt back over a specified period of time at a specified rate.

There will be expenses involved to set this up, but for many people, this is a better path than going down the road of bankruptcy.

If you are genuinely in a position where you admit the debt and cannot pay it might be that you would be best placed to obtain advice from an insolvency practitioner on whether an IVA might be a useful option for you. If you dispute the debt within the Statutory Demand this is unlikely to apply as it may be possible to entirely dispute the amounts you are alleged to owe. We can only advise on this where we are instructed.

What to Do if Your Company Receives a Statutory Demand

If you are a business owner and the Statutory Demand is issued against the company rather than against you personally, then you should take legal advice at the earliest opportunity. 

If the content of the Statutory Demand is disputed you may need to apply to the court for an injunction as soon as possible to stop the company being issued with a winding up petition. The issuance of a winding up petition can in itself result in all company bank accounts being frozen immediately and can effectively prevent a company from trading.

Received a Statutory Demand? Contact Us Today

Remember that this notice is not a demand but a warning to take action – quickly – so you should never ignore a Statutory Demand.  

Unless your situation is quite straightforward and you can reach an agreement with the creditor, then you should take urgent legal advice to explore all the options open to you whilst time allows you to do so.  

Don’t delay. Contact our experienced solicitors now for advice on all aspects of managing Statutory Demands and the best approach for individuals and companies to improve your position.

Posted by:

Alex Cook

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