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Statutory Demand

A powerful legal request for payment of a debt that can result in bankruptcy if not met within 21 days.
Information

What is a Statutory Demand?

A statutory demand is a formal demand for an undisputed debt served on either business or individual debtor for payment in full of an overdue balance. As per section 123(1)(a) of the Insolvency Act 1986, the debt must be above £750 for a business debtor and £5,000 for an individual debtor, and within the last 6 years.
Using Statutory Demand

When and How to Use It Effectively

A statutory demand tends to be a more direct and aggressive alternative to pursuing a debt as opposed to a Letter Before Action (LBA) as it grants a Creditor the power to initiate bankruptcy proceedings on a debtor.

This doesn’t necessarily have to involve a Solicitor although there are certain formalities and information which a Statutory Demand must include otherwise it could harm your chances of recovering the debt if the case makes it’s way to Court.

It therefore shouldn’t be carelessly used as a first port of call debt recovery tool but instead as a means to recover your debt after other avenues have failed.

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Statutory Demand Builder

See our Statutory Demand Free Template

The demand must be issued in a written form although can be served electronically and/or hard copy. The usual request is for the Debtor to make payment in full within 21 days or make an acceptable arrangement to pay or have the demand set aside (in the case of an individual).

A respondent who disputes the debt must reply in writing within 21 days with reasons for their contention or acceptance to make payment however if they then follow up with an invitation to withdraw the demand then the Creditor must oblige.

If the Debtor fails to respond after 21 days then it can be used to support a bankruptcy or winding up petition on the grounds that the Debtor is essentially unable to pay its debts. The advantage of a Statutory Demand is that it is the quickest and most direct method to recovering the outstanding balance as opposed to issuing an LBA and going through debt recovery proceedings.

The Pros and Cons

Issuing a Statutory Demand for Debt Recovery

Due to the severity of consequences a Debtor will usually respond to a statutory demand and make a satisfactory effort to reduce the overdue balance or pay in full and therefore it is within your right to rescind the statutory demand if there has been genuine attempt to address the debt.

However if in the unfortunate event you do have to proceed with court action then it will enable you proceed quicker however, there is still no guarantee that you will receive payment as secured creditors are prioritised over those with unsecured debts and you could end up being making matters even worse.

Especially if you have a good rapport with your debtor. There are many reasons why debtors don’t make payment and it usually the case that they too are suffering financial and cash flow worries. Therefore issuing a Statutory Demand shouldn’t be taken lightly and if there other less combative options then it may be worth seeking this before you go begin proceedings.

Effective Invoice Debt Recovery

We can help you with any size debt. Commonly all it takes is a call or email from a third-party such as Invoice Claims to your debtor to establish the problems and set out a plan for payment. By doing this means you may be able to curry favour with a business and get paid quicker than other Creditors also awaiting payment which may not be the case if you were to simply issue a statutory demand.

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