What is a statutory demand?

A statutory demand is a formal warning notice a creditor may send you if you have an outstanding debt that must be paid. This is the start of the process they need to follow if they want to make you bankrupt.

If you’ve been served a statutory demand and don’t want to go bankrupt, you need to comply with the demand or ask the court to cancel it, this is known as ‘set aside’.

For debts which are regulated by the Consumer Credit Act, the creditor must have defaulted the account before they can issue a statutory demand.

It's important you don’t ignore a statutory demand. If you don't repay the debt in full or come to an arrangement to repay it within 21 days of the demand being served, your creditor can apply to make you bankrupt.

Being at risk of bankruptcy through a statutory demand is a sign you need help with your debts. We’re here to help.

Don't wait to contact us for free debt advice if you’ve received a statutory demand.

How do I reply to a statutory demand?

If you’ve received a statutory demand there are several options to consider. You can:

Apply to have the statutory demand cancelled
Comply with the demand and make an agreement to pay the debt
Reduce the amount you owe to below the bankruptcy limit of £5,000
Do nothing - but your creditor can go ahead to make you bankrupt

How to set aside or cancel a statutory demand

If you think the statutory demand is wrong you can apply to the court to have it cancelled.

The reasons for applying to set aside a statutory demand could include:

The debt is below the bankruptcy limit of £5,000
You’re in the middle of disputing the debt. For example, if you currently have a case being investigated by an ombudsman
The debt is statute barred. This is when a creditor takes too long to take action to recover a debt.

You can’t get a statutory demand set aside because of minor errors in the forms, because you’re in financial difficulties, or because 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’ll need to complete form IAA and submit to the court named on the demand. You should also send a copy to the creditor.

How to comply with a statutory demand for payment

This means either paying it off, or making an arrangement to pay. To comply with the statutory demand you’ll need to either:

Pay off the debt in full
Make an agreement with the creditor to pay the debt off in instalments
Set up an individual voluntary arrangement (IVA) – before going ahead with an IVA you should always get free debt advice and make sure you understand what fees you would pay and how this could affect you
Agree with the creditor to secure the debt against your home or another asset – we strongly recommend you get legal advice before considering this

You do have some time to consider your options as you have 21 days before your creditor could start action to bankrupt you.

Do nothing about the demand

If you do nothing, your creditor may go on to make you bankrupt. They’ve got up to four months after the statutory demand to apply to the court for a bankruptcy petition.

If you don’t want to go bankrupt, then doing nothing is a bad idea. It’s not guaranteed that your creditor will start to make you bankrupt after the statutory demand, but it’s a significant risk. The effects of bankruptcy can be very serious, so don’t take any chances.

If you do want to go bankrupt, then doing nothing after a statutory demand might be a good idea – if your creditor goes on to make you bankrupt they’ll have to pay the costs of this instead of you paying. Bankruptcy can give you a fresh start, but it has serious implications and shouldn’t be undertaken lightly.

Breathing space

The Debt Respite Scheme, or Breathing Space aims to help relieve some of the pressure of dealing with your creditors, for up to six months, so you can focus on getting help with your debts. While you’re on Breathing Space a creditor cannot start bankruptcy proceedings against you or 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?

If you don’t comply with a statutory demand or set it aside, the creditor usually has four months to petition for your bankruptcy. If a creditor wants to use a statutory demand that’s more than four months old, they’ll need the court’s permission.

Does a statutory demand affect your credit rating?

Statutory demands aren’t recorded on your credit file, although all missed payments are. When your bankruptcy terms have been confirmed by the official receiver, it’ll be recorded on your credit file.

How can I identify a statutory demand?

A statutory demand is a form which includes details of the debt you owe.

The forms will normally be delivered to, or ‘served’ on you in person. This means your creditor or an agent working on their behalf will visit to hand you the form.

They can send the statutory demand by post, but only if they’ve tried to serve it in person first and been unsuccessful.

The format of the demand and how the creditor needs to serve it is set out in insolvency legislation

Can I ignore a statutory demand?

If you ignore a statutory demand, it’s likely that you could be made bankrupt. If you don’t agree with a statutory demand you’ve been given, you can apply to challenge it and get it ‘set aside’.

How we can help you

If you’ve had a statutory demand served on you, or a creditor has written to you saying they’ve tried to deliver a statutory demand, use our online debt advice tool, or call our debt advisors (free from all landlines and mobiles).

We’ll help you work out what you can realistically afford to pay towards this and your other debts. We can also give you detailed advice on the effects of bankruptcy on you, and what steps you need to follow to deal with the statutory demand.