Statutory Demand: What It Means and What to Do in 21 Days

What is a statutory demand?

A statutory demand is a document a creditorHow to Deal with Creditors: Communication and NegotiationPractical advice on communicating with creditors, negotiating affordable repayments, and understanding your rights when dealing with the companies you owe.Read more → sends directly to you, not one issued by a court. It states the amount owed and warns that if you do not pay, secure or agree the debt within 21 days, the creditor may start bankruptcy proceedings. The rules sit in the Insolvency Act 1986 and the Insolvency Rules.

Statutory demands are most often used for larger unsecured debtsUnsecured debtAn unsecured debt is borrowing that is not tied to an asset, so the lender cannot automatically take your home or car if you do not repay.Read more → and business-related debts, including tax. The rules for limited companies differ, so if the demand is addressed to a company, speak to Business DebtlineBusiness Debt Help for Sole Traders and Small FirmsWhere small businesses and the self-employed can get free debt advice in the UK, and the main options, from payment plans to a company voluntary arrangement.Read more → or an insolvency adviser. Scotland has a different system, and this guide covers England and Wales.

Check it is genuine

A real statutory demand for an individual follows a prescribed form and includes explanatory notes about your rights. It names the creditor and the debt, and tells you how to respond. Scammers sometimes send letters headed "statutory demand" to frighten people into paying.

• Check the creditor's name and the origin of the debt against your own records
• Do not pay to a personal account or by gift card
• Contact the creditor using details you find yourself
• If it came from a solicitor, check the firm on the SRA register. Our guide to debt letters from solicitors shows how

The two deadlines that matter

The £5,000 rule

In England and Wales a creditor can generally only petition for your bankruptcy alone if the debt is £5,000 or more. If the demand is for less, the creditor can only apply together with other creditors whose combined debts reach £5,000. A debt below the threshold is therefore one of the grounds to ask the court to set a demand aside, although it may not work if other creditors plan to join in.

Do not confuse this with the £750 figure you may see online. That relates to company debts. For individuals, the figure that matters is £5,000.

Grounds for setting a demand aside

You may be able to ask the court to cancel the demand if:

• You have a claim against the creditor equal to or greater than the debt
• The debt is secured against property worth at least as much
• The debt, or the unsecured part, is below £5,000
• You genuinely dispute the debt on reasonable grounds, for example a mistake in the amount or an unresolved complaint
• The debt is statute-barredStatute-Barred Debt: The Six-Year Rule and UK Time LimitsIs your debt too old to be enforced? Learn the UK time limits, what restarts the clock, how it differs from your credit file and what to do before replying.Read more →, which our guide to statute-barred debt explains
• There is another reason the court considers enough

What to gather before you take advice

A good adviser can move faster if you have the key papers ready. Collect the demand itself and the envelope or proof of the date you received it, any earlier letters, the original agreement or statement if you have it, evidence of any payments, and a list of your income, essential spending and other debts. Note the date of service, because every deadline counts from it.

Your options

• Pay in full or agree terms with the creditor in writing within the 21 days
• Dispute it and apply to set it aside within 18 days
• Formal debt solutions, such as an individual voluntary arrangement (IVA)Individual Voluntary Arrangement (IVA)An IVA is a formal, legally binding agreement to repay part of your debts over a fixed period, set up and supervised by an insolvency practitioner.Read more → or a debt relief order, if you qualify. Our comparison of IVA, DMP, DRO and bankruptcy sets them side by side
• Bankruptcy, which you can apply for yourself if you decide that is the right route. See our bankruptcy guide for what it involves

Can Breathing Space help?

In England and Wales, a debt adviser can apply for Breathing Space, a legal pause of up to 60 days. While it is in place, creditors cannot make you bankrupt or issue a statutory demand. It is not a substitute for the statutory demand deadlines if the demand has already been served, so ask an adviser how the two interact.

What happens if the deadlines pass?

After 21 days without payment, agreement or a set-aside application, the creditor can ask the court to make you bankrupt. You will be told of the hearing and can object using the right form at least five business days before it, then attend. A court makes the final decision. Bankruptcy has serious consequences for your credit, property and finances, so treat the earlier stages as the real opportunity.

A statutory demand is not the same as

• A letter before action, which warns of a court claim for an ordinary debt. See what to do with a letter before action
• A county court claim form, which has its own response deadlines
• A final demand letter, which is a creditor's warning rather than a formal legal document. See final demand letters

Getting help

A statutory demand is one of the situations where free advice is most valuable. National Debtline, StepChangeStepChange Explained: What It Does and How It WorksWhat the debt charity StepChange offers, how its free debt advice and debt management plans work, who it suits and what to expect when you contact them.Read more →, MoneyHelper and Citizens Advice can all explain your options and, in many cases, help you prepare. Our free debt advice charities comparison shows how they differ. A solicitor can help with a set-aside application, but check any fee before you agree.