Received a statutory demand or a bankruptcy petition?

What is a statutory demand?

A statutory demand is a formal written demand from a creditor for payment of a debt. You have 21 days to pay it or agree terms, and 18 days to apply to set it aside; if you do nothing and the debt is £5,000 or more, the creditor can petition for your bankruptcy (GOV.UK (opens in a new tab); rule 10.4 (opens in a new tab); Insolvency Act 1986, section 268 (opens in a new tab)).

Anyone you owe money to can serve one, and they do not need a lawyer. GOV.UK says a creditor cannot usually make a statutory demand for a debt that is over 6 years old. The demand should be handed to you in person; it can only be posted by registered post or put through your letterbox if it cannot be delivered that way (GOV.UK (opens in a new tab)).

Ignoring a demand can end in bankruptcy, so read our guide to what bankruptcy would mean for you alongside this page.

This page is about demands served on you as an individual, a sole trader or a partner. If the demand was served on a limited company, see a statutory demand served on a company on the NTF Corporate Solutions website. NTF Corporate Solutions Limited is part of the NTF group and run by the same two practitioners, so the group benefits from any work it takes on.

What should I do in the 18 days after a statutory demand?

In the 18 days after a statutory demand is served, decide whether you owe the debt: if you dispute it, apply to the court named on the demand to set it aside before the 18 days end, and if you owe it, pay it or reach an agreement with the creditor within 21 days (rule 10.4 (opens in a new tab); GOV.UK (opens in a new tab)).

Write down the date you received the demand. Your application to set it aside has to say when you became aware of it, and the court counts the 18 days from the date it was served (rule 10.4(6) (opens in a new tab)).

If you owe the debt and cannot pay it, compare your options for dealing with debt before the 21 days run out.

Can I set aside a statutory demand?

An individual can apply to court to set aside a statutory demand, for example if the debt is disputed on substantial grounds, and the application must be made within 18 days of the demand being served on you (21 to 34 days if you were abroad) (rule 10.4 (opens in a new tab); GOV.UK (opens in a new tab)).

You apply on form IAA to the court named on the demand. A company cannot apply to set aside a statutory demand served on it.

The court may set aside the demand if:

• you appear to have a counterclaim, set-off or cross demand that equals or exceeds the debt
• the debt is disputed on grounds that appear to the court to be substantial
• the creditor holds security for the debt and the demand does not deal with it properly, or the security is worth at least the full debt
• the court is satisfied on other grounds that the demand ought to be set aside (rule 10.5(5) (opens in a new tab))

What happens if I ignore a statutory demand?

If you ignore a statutory demand for a debt of £5,000 or more, the creditor can petition the court for your bankruptcy once 3 weeks have passed since it was served, and GOV.UK says a creditor has 4 months to apply (section 268 (opens in a new tab); GOV.UK (opens in a new tab)).

A demand for less than £5,000 cannot found a petition on its own, because a creditor’s petition needs debts at or above the bankruptcy level of £5,000. Creditors can petition together, though, if their debts add up to that amount (section 267 (opens in a new tab); section 264 (opens in a new tab)).

If you apply to set the demand aside and lose, you have to pay within the 21-day limit, and the court can give the creditor permission to issue a bankruptcy petition (GOV.UK (opens in a new tab); rule 10.5(8) (opens in a new tab)).

What is a bankruptcy petition?

A bankruptcy petition is a creditor’s application to the court asking it to make you bankrupt, and it can be presented for unsecured debts of £5,000 or more that you appear unable to pay, or by the supervisor of an IVA whose terms you have broken (section 264 (opens in a new tab); section 267 (opens in a new tab)).

The creditor has to give you a copy, normally in person. Once it is filed, your name is added to the Land Charges register, and if you own a property on your own, HM Land Registry adds an entry that may stop you selling it (GOV.UK (opens in a new tab); GOV.UK (opens in a new tab)).

If you want to deal with your debts through bankruptcy yourself, applying for bankruptcy online explains the £680 application. A petition against a limited company is a different process: see a winding-up petition against a company on the NTF Corporate Solutions website. NTF Corporate Solutions Limited is part of the NTF group and run by the same two practitioners, so the group benefits from any work it takes on.

What happens at the bankruptcy hearing?

At the bankruptcy hearing, which the court sets for at least 14 days after you were given the petition, the court can make a bankruptcy order, stay the petition, dismiss it or adjourn the hearing (GOV.UK (opens in a new tab)).

You can go to the hearing. If you disagree with the petition, you can oppose it by sending form Bank 6 to the court at least 5 days before the hearing; there is no court fee to oppose, but you might have to pay costs if you are not successful.

If the court makes a bankruptcy order, it sends it to the official receiver, who deals with your bankruptcy from then on. If publishing your address would put you at risk of violence, apply for an order to keep it private before the hearing (GOV.UK (opens in a new tab)).

Can an IVA stop a bankruptcy petition?

An IVA can stop a bankruptcy petition: while an interim order is in force, no bankruptcy petition relating to you may be presented or proceeded with (Insolvency Act 1986, section 252 (opens in a new tab)), and you can apply for one when you intend to propose an IVA to your creditors (section 253 (opens in a new tab)).

While your application for an interim order is pending, the court can stay any action or other legal process against you, and a court hearing proceedings against you can pause them (section 254 (opens in a new tab)).

The proposal needs a nominee who is qualified to act as an insolvency practitioner. James Kaye and Nick Morgan are licensed insolvency practitioners and can act as nominee, so time matters: if a petition has been served, speak to a practitioner well before the hearing. Our guide to how an IVA works explains the monthly payments, the fees and the risks.

If you have already been made bankrupt, an IVA agreed afterwards is one of the grounds for asking the court to cancel the bankruptcy (GOV.UK (opens in a new tab)).

What happens if a creditor petitions for my bankruptcy?

A creditor owed £5,000 or more can petition the court to make you bankrupt, usually after an unpaid statutory demand or court judgment. The hearing is at least 14 days after you receive the petition. You can pay, oppose the petition at least 5 days before the hearing, or propose an IVA; an interim order stops the petition going ahead while the proposal is considered (GOV.UK (opens in a new tab); section 267 (opens in a new tab); section 252 (opens in a new tab)).

An interim order is not automatic. You apply to the court for one with your IVA proposal, which names a licensed insolvency practitioner as nominee (section 253 (opens in a new tab)). If you are thinking of this route, speak to a practitioner well before the hearing date.