When properly served, and it has to be formally served, this is a legal notice from the creditor to the debtor giving them 21 days to settle the debt otherwise a bankruptcy petition may be issued.

View a statutory demand as a warning shot. Generally the courts have frowned on Statutory Demands as a method of debt collection. In many case with consumer as opposed to commercial debt the creditor does not pursue the bankruptcy route.   If the Demand is served on you personally, that is by a process server as opposed to by post take it very seriously indeed. The same applies if the demand was attempted to be personally served but wasn't successful.

Providing it has been served correctly you must treat a Statutory Demand as a matter of urgency. Especially if the person/business behind the demand:

• Is willing and able to take you to court to recover their monies
• Is upset with you and the threat is more emotionally based than financial
• Knows that the attempt to make you bankrupt will affect your professional reputation (all bankruptcy hearings are public knowledge, regardless of outcome)

It is vital to act quickly when receiving a Statutory Demand to avoid the creditor bankrupting you or applying for a Winding up Petition.

Often the use of Statutory Demands is inappropriate and in many cases they can be set aside by the Court. This will prevent a creditor from taking any formal insolvency process against you.

Anyone can issue a statutory demand.   It is not a document that is issued at Court.  Generally they are held on Debt Collectors computers and just filled in with your details. It is not even a requirement to serve one before a bankruptcy petition is issued, but it does make the creditors life easier if one is served.

A statutory demand must show a named person or persons from the Creditor or their agent/solicitor whom you can contact directly. This is Rule 6.2 of  The insolvency Rules 1986.

This means that if the statutory demand doesn't give the name of a person you can speak to then it is not valid. If you try to contact the named person and they won’t put you through then it is also invalid.

Be aware that named people on accompanying letters are not part of the Statutory Demand - only those on the Demand itself are valid.

Important - make notes of dates/times you try to call the named person on the statutory demand, together with the name of the person that you spoke to and a note of what was said. Write and confirm everything said by Special Delivery.

How to prevent a statutory demand escalating to a bankruptcy petition

• Reduce the debt owed to the creditor to below £750 (The legal minimum amount owed that can result in a bankruptcy order)
• Apply for the demand to be set aside but only if you have proper grounds
• Make an offer to settle or compound  the debt/s  to the creditors satisfaction.(For example offering some security).

How to Set Aside a statutory demand 

• Dispute the amount owed (proof is required). This will only apply if the dispute is genuine and the value of the dispute reduces the undisputed sum to below £750
• The Creditor serving the demand holds security/assets of yours that are equal to or worth more than the claim
• The amount owed is below £750
• The person served the statutory demand owes you money amounting to the same value or more than they are claiming from you also - this is called a counterclaim or set off and there must be a Triable issue between you
• The demand is served in error
• The creditor failed to comply with the rules - such as the delivery of the statutory demand. Though in this case the court will usually allow the demand to stand unless there has been any real prejudice or injustice.

Note:    This must be done within 18 days of the demand being served