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Creditor has sent a statutory demand - bankruptcy

This advice applies to Wales

If a creditor wants to make you bankrupt, they have to follow a certain process. Often, this will start with sending you a warning notice about your debt, called a statutory demand. It's very important you don't ignore a statutory demand. If you do, your creditor could apply for you to be made bankrupt.

This page explains what you can do if you receive a statutory demand from a creditor, especially if you want to avoid being made bankrupt.

What is a statutory demand?

A statutory demand is a kind of written warning from a creditor. It will state that if you don't pay your debt or come to another arrangement that's acceptable to the creditor, they may start court proceedings to make you bankrupt.

If you don't repay the debt in full or come to some other arrangement within 21 days of the demand being served on you, your creditor can apply to make you bankrupt, unless the demand is cancelled or set aside.

Your options if you receive a statutory demand

You have several options if you receive a statutory demand. The most important thing is not to ignore it if you don't want to become bankrupt. If you ignore a statutory demand, the chances are that your creditor(s) will then apply to make you bankrupt.

You should get advice about how bankruptcy would affect you. It may be the best option for dealing with your debt situation. You can get advice from a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB.

Your options are:

Apply to have the statutory demand cancelled

Time limits

There are certain time limits creditors have to keep to when taking court action for debt. If the time limit has run out, the debt is called statute barred and the creditor isn't allowed to take court action to get you to pay. You should check whether the time limit has run out, and make sure you don't do anything to inadvertently re-start the time limit.

More about statute barred debts.

If you think the statutory demand can be challenged, for example because you don't owe the money or the creditor is out of time for taking court action, you can apply to the court to have the statutory demand cancelled, as long as you do so within 18 days of it being served. This is called being set aside. If the court agrees to set aside the statutory demand, it will be cancelled and your creditor may not be able to  carry on trying to make you bankrupt. This depends on the reason why it is set aside.

Some of the grounds for getting a statutory demand set aside are very technical, so it's really important to get advice about whether you have grounds to make a challenge.

Pay the debt in full

If you accept that you owe the debt and you can afford it, the easiest way to deal with a statutory demand is to pay the debt in full.

Offer to pay by instalments

Your creditor may accept an offer from you to pay off your debt in instalments. They may prefer this as they'd probably receive more money this way than they would by making you bankrupt. It may offer you an affordable way to sort out your debt problem.

Ask your creditor to write off the debt

If you have no income or belongings of value and no other way of paying what you owe, you should explain this to the creditor. You could ask them to write off your debt. They may decide not to continue taking action against you or trying to make you bankrupt (which they would have to pay for), when they realise they'd have nothing to gain by doing so.

Offer security on your property against the debt

If you own your home or other property, you could offer the creditor security on it which can be held against your debt. When your home is sold in the future, your debt will then be paid from the proceeds. This is called a voluntary charge. You should always take specialist housing advice before agreeing to a voluntary charge on your home.

Set up an individual voluntary arrangement

If you have some valuable assets or a regular income that could be used to pay your creditors, you could ask to set up an individual voluntary arrangement (IVA) as an alternative to bankruptcy. An IVA is a legally binding arrangement to pay your creditors over a set period of time. It can be expensive to set up but may be a better solution for you than going bankrupt.

Reduce the amount you owe to below £5,000

If you can make a payment towards your debt that reduces the amount you owe to below £5,000, your creditor can't apply to make you bankrupt.

Accept that you don't have a way of paying the debt and will be made bankrupt

You may not be able to come to an agreement with your creditors, or you may decide that bankruptcy is the best option for you. If this applies to you, it's best not to acknowledge the statutory demand or communicate with the creditor in any way.

Next steps

More information

'Statutory demands' - from the Insolvency Service at www.gov.uk.

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