Statutory Demand

A statutory demand is a formal written demand that requires a debt to be paid or a suitable agreement to be reached within 21 days, otherwise you can apply for the Debtor to be made bankrupt (through a Bankruptcy Petition) or wound up (through a Wind Up Petition).

The main difference between a statutory demand and a letter before action is that a statutory demand is only available for larger debts and is usually used when bankrupt proceedings are contemplated.

In debt recovery a statutory demand is the last letter before commencing legal action to have the Debtor made bankrupt and liquidated.

A statutory demand is important as it makes the Debtor understand that you are serious about recovering a debt, and failing to do so will result in immediate legal action.

It is also important because a statutory demand cannot be ignored. If the Debtor ignores or chooses not to challenge the statutory demand, then it demonstrates that the debt is not disputed and is outstanding.

Only when the debt is not disputed and is outstanding can you safely apply for a wind up petition. Failing to meet these two criterias could have the application dismissed with the Creditor recovering his costs from you.

A wind up petition is an application made to the court to have a company to be declared insolvent as they are unable to pay their debt.

When a company has been winded up, they will enter compulsory liquidation, which means a liquidator will be appointed to try and sell assets to repay the Creditor.

A wind up petition should only ever be issued in circumstances where at least £750 of the underlying debt is not subject to an underlying dispute.

A bankruptcy petition is an application made to the court to have an individual be made bankrupt as they are unable to pay their debt.

The individual can be made bankrupt should they owe more than £5,000 to the Creditor and there is no dispute over the debt.

Following the bankruptcy petition if the court declares a Bankruptcy Order against the individual in debt, then an Official Receiver or Trustee may take possession of the individual’s houses, cars and other assets to sell to pay the debt.

Both the wind up petition and bankruptcy petition can be used as an enforcement of judgment.

Once court action has taken place and a County Court Judgment (CCJ) has been obtained against the Debtor, this effectively means the debt is no longer disputed and is still outstanding.

Therefore a wind up and bankruptcy petition can be used as a enforcement of judgment. It also means we do not need to serve a statutory demand as the CCJ means we would already meet the two criterias to have a successful application.