Statutory Demand – What to Do When a Warning Becomes Serious
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Have you received a statutory demand? You’re not alone! In fact, more than 170,000 people visit this site for advice on debt matters.
In this article, we’ll address the following questions:
- What is a statutory demand?
- Can you ignore a statutory demand?
- Can you cancel a statutory demand?
- When does your debt become statute-barred?
- What to do when you receive a statutory demand?
Dealing with debt can be challenging; some of us have been in your shoes. But don’t worry; we’re here to help you figure things out.
Let’s dive in!
What is a statutory demand?
A statutory demand is a formal request for debt payment served by a creditor. A creditor can send a warning notice to demand that you pay up your debt or reach an agreement to pay within 21 days. After 21 days, your creditor can go ahead to make you bankrupt if you don’t take the right steps.
Can I ignore a statutory demand?
If you’re served a statutory demand, one thing you don’t want to do is ignore it, especially if you don’t want to become bankrupt. Ignoring a statutory demand can cause your creditor to petition for your bankruptcy.
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Can I cancel a statutory demand?
Yes. You can apply to have the statutory demand set aside or cancelled on genuine grounds. The reasons for which you can apply to set aside a statutory demand include the following:
1. During a dispute – if there’s a dispute between you and your creditor over the debt, such as when they claim you owe them for goods you didn’t receive.
2. During a counterclaim or countersuit – when you allege that your creditor owes you – under a contract – a sum that’s as much money as you owe them.
3. Incorrect issuing of statutory demand – when your statutory demand was issued incorrectly, such as when it contains inaccurate details of the debt or when you think you don’t owe the creditor.
4. When you owe less than £5,000 – the minimum amount you can owe before a creditor can send you a statutory demand is £5,000. If you receive a statutory demand for less than the bankruptcy limit, you can apply to cancel the demand.
5. When the debt is statute-barred – debts become statute-barred when the creditors’ time limit for taking court action has passed. Thus, they can no longer serve a statutory demand or any other court papers, and you don’t have to pay the debt.
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When does my debt become statute-barred?
Most debts, besides mortgage debts, become statute-barred after six years since you made a payment or wrote to the creditor.
For mortgage debts, the time limit is six years for the mortgage interest and 12 years for the actual amount if you still owe money after your home is repossessed. You may need to read more about statute-barred debts to know if your debts are included.
What to do when you receive a statutory demand?
If you’ve been served a statutory demand and you feel you do not have any grounds for applying for cancellation, there are several things you can do to avoid facing bankruptcy. We have outlined your options below.
1. Clear the debt
This is the easiest and most stress-free way to handle a challenging debt if you can afford it. Once you settle your creditors, the case ends there, and they wouldn’t need to petition for bankruptcy.
2. Ask to pay in instalments
If you can’t afford to settle your debts at once, you might consider reaching an agreement with your creditor to prevent them from taking any further action against you. Creditors tend to be understanding when you explain your situation and offer a payment plan that’s feasible regarding your financial situation.
More importantly, they will prefer this option because it offers them more money than they would get by applying for your bankruptcy.
3. Ask your creditor to write off the debt
Yes. As simple as this sounds, it works for some people. Sometimes creditors believe you are purposely unwilling to pay them, which is why they don’t mind going the extra mile to recover their monies.
However, if you explain your financial hardship to your creditor and show them you genuinely have no income or valuable belongings that can help you pay, you may be able to ask them to write off your debt.
Creditors understand that applying to make you bankrupt comes with its charges, and since they’d probably gain nothing by making you bankrupt, they could stop taking any legal action against you and write off your debt.
4. Offer security on your property
While this challenging decision requires professional housing advice, it can be the only solution against going bankrupt when dealing with insistent creditors. If you own a valuable asset or property, offering security on your property against your debt helps to stop your creditor from making you bankrupt.
Your property will be held against the debt and then sold at a later time. Once sold, the debt will be taken from the sales proceeds, and whatever is left will be returned to you (if anything remains).
5. Set up an IVA (Individual Voluntary Arrangement)
Setting up an IVA helps you freeze your debt and pay it back in instalments over a period of time, usually five years. An IVA might be worth it if you have a property or steady earnings that can clear your debts over time.
Although an IVA can be expensive to set up, it’s a better alternative for individuals who do not want to go bankrupt and do not have other alternatives.
An IVA can help you with debts like:
· personal loans
· hire purchase debts
· mortgage shortfalls
· credit and store cards etc.
6. Take your debts below £5,000
Another thing you can do to break loose from the pressure of a statutory demand is to take your debts below the £5,000 limit. Discuss with your creditors and pay some money to reduce your debts below £5,000. With that, they do not have the power to make you bankrupt anymore, and if they send a statutory demand, you can easily apply to set it aside or cancel it.
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