Statutory Demands
A statutory demand is used as a prelude to commence bankruptcy proceedings. When an individual receives a statutory demand, they have 21 days to either:
- Settle the debt
- Reach an agreement to pay the debt
The general rule is that statutory demands should be hand delivered to the debtor. This is normally couriered by a process server.
If they dispute the debt, a debtor has 18 days to apply to have the statutory demand set aside. If the debtor does not apply to set aside the demand or the Court dismisses an application to set aside the demand, and the debt is not paid within the time frame, the creditor may begin bankruptcy proceedings against the debtor by applying to Court by petition.
Bankruptcy Proceedings
In order to initiate bankruptcy proceedings, the creditor will have to show that:
- The debt owed is £5,000 or more; and
- The debtor is unable to pay off the debt or has no reasonable prospect of being able to pay.
A bankruptcy order will not be made if a debt is genuinely disputed. If a bankruptcy order is made, the debtor’s accounts will be frozen and the Official Receiver will be appointed to take control of the bankrupt’s property and finances. The Official Receiver will prepare a report with a summary of the debtor’s financial situation which will be provided to the creditors and deal with creditor’s claims.
The bankruptcy generally ends after one year, when a debtor will be discharged from his or her bankruptcy and in most cases unsecured debts will be written off at this point.
The Court fees to start bankruptcy proceedings are:
- £990 Official Receiver’s deposit (for managing the bankruptcy)
- £280 Court fee
The Courts do not encourage bankruptcy petitions as a method of debt recovery and it is therefore important that it is approached with caution and with the benefit of legal advice.
How Can Nelsons Help?
Nelsons can provide excellent service for both issuing of statutory demands and insolvency proceedings. We can also provide advice on the risks involved and whether this method of debt recovery is appropriate to your circumstances.
If you would like further information on statutory demands or insolvency proceedings, please call us on 0800 024 1976 or contact us via our online form.