What is a Statutory Demand?
A Statutory Demand is a formal demand for payment which is sent by a creditor either as a scare tactic or a pre-requisite to wind up a company (Corporate) or to make someone bankrupt (Personal).
The form allows for the period of 21 days from the demand being served to pay the debt outlined in the demand, otherwise they have proved to the satisfaction of the court that you are unable to pay the debt or are refusing to.
What are your Options?
1. Pay the debt
If you agree to the debt and can afford to pay then you should do so at the earliest opportunity and in any event before the expiration of the 21 day period.
2. Come to a payment arrangement
Agree a payment plan with the creditor in order to pay the debt over a period of time.
3. Challenge the debt
If you do not agree that the debt is owed you can challenge the Statutory Demand by applying to Court.
The time period for challenging the debt is 18 days of the demand being served on you.
There are several reasons why the demand can be challenged which can be advised by us.
4. Reduce the amount to below £5,000
In order to obtain a winding up order or bankruptcy order against you the creditor must be owed over £5,000. If you are able to reduce the debt to below this level then they cannot wind up the company or make you bankrupt.
5. Enter into an Individual Voluntary Arrangement (IVA) or Company Voluntary Arrangement (CVA)
If you are unable to pay your debts and you agree that the debt is owed then you could look into an IVA (Personal Debt) or a CVA (company Debt).
An IVA / CVA is a formal agreement between you and your creditors, usually over a time period of 5 years and will normally be a percentage of your total debt.
It is not possible to confirm what percentage this will be as it is based on your personal circumstances and affordability.
This route is preferred for debtors with equity in their property or if the terms of their employment prohibit bankruptcy.
In a company situation this would be suitable where there is a sound business and they believe they can trade out of the situation with a little assistance.
6. Bankruptcy / Winding up
The final option is to acknowledge that the debt is owed and you are unable to pay the debt.
In this case if the amount is over £5,000 the creditor could make you bankrupt or wind up the company and would proceed to obtain the relevant order from the court.