Statutory Demands

What is a Statutory Demand?

A Statutory Demand is a serious legal letter from someone you owe money to. It tells you to pay your debt or agree to a payment plan. If you don’t reply, the person or company you owe can try to make you bankrupt.

This letter is only sent if you owe £5,000 or more. Receiving one can be worrying, but we’re here to help. We’ll guide you through it step by step.

How do I respond to a Statutory Demand?

Don’t ignore the letter. If you don’t reply, the creditor can start bankruptcy action against you after 21 days. If the letter is from HMRC, it’s very important to act quickly because they usually take further action.

You’ve got 18 or 21 days to reply. The letter will explain this.

Do you agree that you owe the money?

If you agree that you owe the debt, it’s best to set up a plan before they try to make you bankrupt. Bankruptcy can cause big problems for you and your business.

There are a few ways to sort this out:

• Pay by instalments: You can ask to pay the debt in smaller monthly amounts.
• Lower the debt: If you can pay enough to drop the debt below £5,000, they can’t use it to make you bankrupt.
• Secure the debt: If you own your home, you might be able to secure the debt against it using a voluntary charge, but you should speak to an advisor first.
• Use a debt solution: You could look at options like an Individual Voluntary Arrangement (IVA) to help you manage the payments.

What if you disagree with the debt?

If you think the letter is wrong, you can ask the local County Court to cancel it. This is called asking to “set aside” the demand. You must apply for this within 18 days.

The court might cancel the letter if:

• You owe less than £5,000.
• You disagree with the amount they say you owe.
• The letter was sent to you by mistake.
• You’ve got the money to pay the debt in full.

While the court looks at your form, the creditor can’t make you bankrupt.

What if you’ve got to go to court?

If you don’t reply or the court doesn’t cancel the letter, you’ll get a date for a bankruptcy hearing. It’s very important that you go to this hearing.

If you want to stop the bankruptcy, you must send a Form 6 to the court at least five days before your hearing. You can defend yourself if you’ve made a fair payment offer that was rejected or if you can afford to pay all your debts.

Can you be made bankrupt without a demand?

Yes, a creditor can try to make you bankrupt without sending a Statutory Demand first. However, they must give you plenty of warning before a court hearing.

This usually happens in two situations:

• A creditor already has a County Court Judgment or court order against you that you’ve not been able to pay.
• You’ve got an Individual Voluntary Arrangement (IVA) that has failed. The person managing your IVA can apply for bankruptcy without sending a new demand.

Dealing with court action is stressful, but you’re not alone. If you receive any warning about bankruptcy, the best thing you can do is reach out for support straight away.

Information if you live in Scotland

The rules are a little different if you live in Scotland:

• The process is called Sequestration, rather than bankruptcy.
• The debt only needs to be £3,000 or more.
• You’ll receive a ‘Form 5’ letter from a Sheriff Officer, not a Statutory Demand.
• You’ve got 21 days to reply, pay or deny the debt in writing.
• You can explore different debt solutions, such as a Trust Deed or a Debt Arrangement Scheme (DAS), to stop legal action.

Worried about a Statutory Demand?

Get free, confidential debt advice online or call 0800 316 1833. We’ll help you understand your options and take the next step.