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i England, Wales, and Northern Ireland

What is bankruptcy

What is a statutory demand?

A statutory demand is a formal warning notice. You get this if you have a debt that must be paid. It is the start of the process when a creditor makes you bankrupt.

To avoid going bankrupt, you need to either:

  • Do what the people you owe are asking, or
  • Ask the court to cancel it, this is known as ‘set aside’

For debts regulated by the Consumer Credit Act:

The creditor must have 'defaulted' the account before issuing a statutory demand.

Do not ignore a statutory demand.

The people you owe can apply to make you bankrupt if you do not:

  • Repay the debt in full
  • Come to an arrangement to repay it within 21 days of the demand being served

Risk of bankruptcy is a sign you need help with your debts. Do not wait for free debt advice if you have received a statutory demand.

How do I reply to a statutory demand?

There are a few things you can do if you receive a statutory demand. You can:

  • Apply to have it cancelled
  • Come to an agreement to pay the debt
  • Reduce the amount you owe to below the bankruptcy limit of £5,000
  • Do nothing - but the people you owe can go ahead to make you bankrupt

How to set aside or cancel a statutory demand

Apply to the court to cancel the statutory demand if you think it is wrong

Reasons could include:

  • The debt is below the bankruptcy limit of £5,000
  • You are in the middle of disputing the debt
    • For example, your case is being looked at by an ombudsman
  • The debt is statute barred
    • This is when the people you owe take too long to take action on the debt

Reasons cannot include:

  • Minor errors in the form
  • Your financial situation
  • You think the demand is unfair

You have 18 days to apply to have a demand set aside.

To apply to set aside a statutory demand you need to:

  • Complete form IAA
  • Submit it to the court named on the demand
  • Send a copy to the creditor

How to comply with a statutory demand for payment

To comply with the statutory demand you need to either:

  • Pay off the debt in full
  • Make an agreement with the people you owe to pay the debt off in stages
  • Set up an individual voluntary arrangement (IVA)
    • Always get free debt advice before choosing an IVA
    • Know what fees you pay and how this could affect you
  • Agree to secure the debt against your home or another asset
    • We strongly advise getting legal advice before doing this

You have 21 days to comply. The people you owe can start action to bankrupt you after this.

Do nothing about the demand

The people you owe may go on to make you bankrupt if you do nothing.

They have up to four months to apply to the court for a bankruptcy petition.

Doing nothing is a bad idea if you do not want to go bankrupt.

Not all creditors start to make you bankrupt at this point. But it is a high risk.

The people you owe have to pay the costs if they decide to make you bankrupt.

Bankruptcy can give you a fresh start, but it has serious implications.

Breathing space

Breathing Space can take some of the pressure off of dealing with your creditors. It lets you focus on getting help.

When on Breathing Space your creditors cannot:

  • Make you bankrupt
  • Issue a statutory demand

Find out more about the Breathing Space scheme and if you can apply.

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How long is a statutory demand valid for?

The people you owe have four months to petition for your bankruptcy if you do not:

  • Comply with a statutory demand or
  • Set it aside

After four months, they need to ask the court if they can still use it.

Does a statutory demand affect your credit rating?

Statutory demands are not recorded on your credit file, but all missed payments are.

When your bankruptcy terms are confirmed by the official receiver, it is recorded on your credit file.

How can I know what a statutory demand is?

This is a form which includes details of your debt.

It is usually delivered, or ‘served’, to you in person.

They can send be sent by post. But only if they tried to give it to you in person first.

Can I ignore a statutory demand?

No, you should not ignore this.

It is likely you will be made bankrupt if you do.

Apply to get it 'set aside' if you do not agree with the demand.

How we can help you

Use our online debt advice tool.

We help you work out what you can afford to pay towards your debts.

We give you detailed advice on:

  • The effects of bankruptcy, and
  • What steps you need to follow to deal with the statutory demand