Statutory Demands for Debt Advisers
This edition’s Specialist Support Case study covers Statutory Demands.
Receiving a Statutory Demand can cause panic with a client or worse. In some cases, they do may fully understand the implications of the demand and ignore it.
A Statutory Demand is a formal request for payment of a debt which exceeds £5k. A creditor issues this before applying to the Court to make the client bankrupt.
If a client is adjudicated bankrupt, their home may be at risk, it could affect their employment, and they could lose assets.
A Statutory Demand cannot be ignored.
A Statutory Demand must contain;
If the client disputes liability, they have 18 days to ask for the demand to be set aside.
Some of the reasons a demand can be set aside include;
If the client agrees they are liable for the debt, they have up to 21 days to arrange repayment.
The arrangements could include;
Perhaps consider an Individual Arrangement (IVA). An IVA is a legally binding agreement between an individual and their creditors and is useful when they have more than two creditors, a surplus of money each month that can be offered and distributed to their creditors, or possibly have a lump sum of money.
An IVA will usually last for five years. However, if there is property with equity, it may be extended to six years.
In bankruptcy, a home may be at risk, in an IVA the home will be safe as long as the client keeps to the arrangement.
A Statutory Demand is a formal request for payment of a debt which exceeds £5k. A creditor issues this before applying to the Court to make the client bankrupt.
If a client is adjudicated bankrupt, their home may be at risk, it could affect their employment, and they could lose assets.
A Statutory Demand cannot be ignored.
A Statutory Demand must contain;
- Name and address of the client,
- The creditor’s name and address,
- Details of the debt the creditor states are owing
If the client disputes liability, they have 18 days to ask for the demand to be set aside.
Some of the reasons a demand can be set aside include;
- The debtor can provide evidence they are not liable for the debt
- The Court is satisfied it should be set aside on other grounds
- The debt is under £5k
If the client agrees they are liable for the debt, they have up to 21 days to arrange repayment.
The arrangements could include;
- Reduce the level of the debt to below £5k. This will prevent bankruptcy.
- Make realistic offers of payment.
- Get help from family members or friend.
Perhaps consider an Individual Arrangement (IVA). An IVA is a legally binding agreement between an individual and their creditors and is useful when they have more than two creditors, a surplus of money each month that can be offered and distributed to their creditors, or possibly have a lump sum of money.
An IVA will usually last for five years. However, if there is property with equity, it may be extended to six years.
In bankruptcy, a home may be at risk, in an IVA the home will be safe as long as the client keeps to the arrangement.
- Note: An IVA can only be prepared by an Insolvency Practitioner.