A Statutory Demand is issued in three different scenarios:

• Debt payable immediately
• Debt that a court has ordered someone to pay
• Debt payable in the future

It seems unfair to send someone a Statutory Demand for a debt that isn’t yet due. Such a Statutory Demand can be issued if the creditor feels the debtor will be unable to make a repayment.

Statutory Demands can be contested—more on that below.

A Statutory Demand isn’t a legal document, so it can’t be legitimate or illegitimate in and of itself. But you can contest the contents of the demand.

More on that below.

There isn’t a set format for a Statutory Demand. There’s a template available on the UK government website.

You need to perform a financial health check and ask yourself whether you can pay back their debt. If you can, speak to your Creditor about this. If you think you do not have to funds to pay back the debt, you can either apply for yourself to become bankrupt or wait for the Statutory Notice period to run out, at which point the creditors are likely to make you bankrupt.

18 days if you’re in the UK and 21 days if you’re abroad when the Statutory Demand was served.

Usually, after receiving a Statutory Demand, the debtor will pay back the debt or come to some form of arrangement with the Creditors that is to their satisfaction.

You can also challenge a Statutory Demand, if you don’t agree with it.

You can ask the Court to cancel the Statutory Demand if you think it has been incorrectly sent to you; for example, you have already paid the debt or if you think the amount that you owe is less than what is being asked for.

You can also get the Demand cancelled if six years have passed or if you owe less than £5,000

You cannot challenge a statutory demand if it was served on a company. You can apply to stop your creditors from winding up your company instead.

When you have reason to believe your Creditor owes you as much money as you owe them.

You need to download and fill in the court form IAA and attend a hearing.

Possible outcomes

If the application is dismissed, your creditor can immediately apply to make you bankrupt. You can ask the court to delay this if you need more time to pay the debt or get advice. The court usually won’t agree unless you can show you have a plan to pay the debt quickly. For example, if you’re selling property to raise money to pay the debt, you’ll need to show you have a buyer and tell them when it’s expected to sell.

If your application is successful, the statutory demand will be cancelled, or set aside. However, depending on the reason why it was set aside, you may need to continue negotiating with your creditor about the debt, or they could try again to make you bankrupt at a later date.

They are not allowed to do this. You are protected from Creditor action during the appeals process.

You may be charged, if your appeal is dismissed.

The Limitations Act 1980, states that the debt can become statute barred (meaning it does not need to be paid off legally) once six years have passed provided that the Creditors have not gone to court, the debtor has not made any payment or admitted to the debt in writing within the six years.

The six year period starts once the Creditors would have a reason to go to Court. For example, at the moment you miss a payment of a debt whose overall value is at least £5,000, the Creditors can start legal proceedings to reclaim the debt. It’s from this period the six years begin.

Yes, if you admit in writing to have this debt or you make payment or the Creditor does initiate legal action, the six year timer starts all over again.

You can appeal to the court. It is highly recommended to do so with the help of a debt expert.

18 days.

This is when you would secure a personal asset of yours against the debt, such as a house or car. In the event, you cannot continue paying debt, these assets can be sold to help recover the monies owed.

A voluntary charge will discourage Creditors from taking legal action against you to make you bankrupt because they know your asset will pay for the debt, if you can’t.

Essentially, it buys you time to raise funds to pay off debt by fending off legal action.

Do not rush into a voluntary charge before obtaining legal advice.

If you cannot pay the full debt, at least by reducing the monies owed to below £5,000 means your Creditors cannot legally take action against you to make your bankrupt.

If you can evidence to your Creditors that you are in severe financially difficulty and the chance of your financial situation improving are low, meaning even if the Creditors were to initiate bankruptcy proceedings, the chances of getting their money back are slim, they could possible be persuaded to cancel the debt all together.