In technical legal terms, a statutory demand is a prelude to either issuing a bankruptcy petition or winding up petition.
A statutory demand can only be used for a debt of more than £750.00, owed either by individuals or a corporate entity and is only supposed to be used for an undefended debt.
Whether you are a creditor or a debtor, it is important to be aware that the use of statutory demands, in practice, tends to be very tactical, for the following reasons :-
- From a creditors perspective it can be very frustrating to wait the full court process through to judgment. This can take months or even longer. There is s a temptation to short circuit this by simply issuing a statutory demand. However, there are risks.
- Some debtors will panic when receiving a statutory demand and pay up much faster than with a County Court claim
- Serving a statutory demand with no intention to follow through on the threat to issue bankruptcy or winding up is a big gamble. As a creditor, you are effectively calling the debtor’s bluff. If you don’t follow through, the debtor may well believe he/she/they have successfully called your bluff
- Use of a statutory demand without a judgment or where there may be a defence or partial defence to a claim can easily lead to a costs order against a creditor. The person receiving the demand may apply to set it aside as an abuse of process. A statutory demand is not supposed to be a method of sidestepping the normal court process
We can advise and assist on statutory demands whether you are a creditor considering serving a demand or a debtor who has received a statutory demand. If you have received a statutory demand it is vital you act quickly. Please get in touch with David Rosen.