Statutory demands for payment
If you are owed money, one way of getting it back is by sending a written statutory demand, which is a request for payment of a debt owed by an individual or business. The demands can be written and served without the involvement of the courts and it is considered to be the first step in making an individual bankrupt.
The statutory demand will tell the debtor (the person or business that owes money):
- how much must be paid;
- when payment must be made by;
- consequences of ignoring the request (i.e court action to recover the debt);
- who they can contact about the demand; and
- their right to dispute the demand
How do I send a statutory demand?
If you want to send a statutory demand, you will have fill in one of the forms listed below. You may also need to send the form in a particular way. If you are an individual or sole trader, you will need one of the following forms:
- form 6.1 – for a specific amount payable now
- form 6.2 – for a specific amount payable now following a judgment or court order
- form 6.3 – debts payable in the future
Statutory demand 4.1 is required for an unregistered or registered company. You can get forms 4.1 and 6.1 from the Insolvency Service website, and the others can be obtained from a legal stationer. You may wish to seek legal advice or contact the Citizens Advice Bureau for help with filling out these forms.
You have to serve the statutory demand on the debtor. This involves doing everything you can to bring it to the debtor’s attention, and it would be advisable to keep some proof of service.
What do I do if I receive a statutory demand?
You should not ignore a statutory demand, because if the demand is not satisfied or challenged, the creditor can apply to the court to issue a bankruptcy or winding up order against you or your company respectively. To reduce the risk of bankruptcy after receiving a statutory demand, you can:
- reduce the debt to less than £750;
- offer to pay the debt by instalments;
- make a reasonable offer to settle the debt; or
- apply to have the statutory offer set aside
After 21 days from the statutory demand being served, the person may begin petitioning for bankruptcy.
How do I get the statutory demand set aside?
You do not have to agree with the statutory demand, and if this is the case you can have it set aside by applying to the court. To successfully get a statutory demand set aside, you need to be able to satisfy one of the following:
- the amount is disputed;
- the person issuing the demand also owes money;
- the person issuing the demand is holding security that equals or exceeds the amount owing;
- the demand was issued in error;
- the amount owing is less than £750;
- execution has been stayed on a judgment debt;
- the creditor failed to comply with the rules, so the debtor has been prejudiced; and
- the debtor is complying with an instalment order so is effectively paying the debt back.
You have to make an application to set aside the demand within 18 days of receiving the demand (or 22 if you are abroad), which involves completing form 6.4 (application) and form 6.5 (statement of truth) and filing them at court. The court will then consider your case and either dismiss it immediately or set a date for a hearing, at which your application will either be dismissed or the court will agree to set aside the statutory demand.
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