What Is a Statutory Demand?

A statutory demand is a formal written demand for payment of a debt, served under the Insolvency Act 1986. It tells the debtor to pay within 21 days or face the threat of bankruptcy or winding up proceedings. Creditors use it as one of the most direct tools available to pressure payment, since it does not require a court hearing to serve, and it starts a strict legal clock the moment it lands.

Who Can Use a Statutory Demand

Any creditor owed an undisputed debt can serve a statutory demand. The threshold differs depending on who owes the money:

  • Companies: the debt must be at least £750.
  • Individuals: the debt must be at least £5,000.

You do not need a solicitor to serve a statutory demand, and you do not need a prior court judgment. This makes it fast and cheap compared with other enforcement routes, but courts do not treat it as a casual step. Using a statutory demand purely to pressure a debtor over a genuinely disputed debt can backfire badly, including cost orders against the creditor.

How a Statutory Demand Is Served

The creditor must bring the demand to the debtor’s attention using one of several accepted methods:

  • Personally handing it to an individual debtor.
  • Leaving it at a company’s registered office address.
  • Giving it to a director, company secretary, or manager of a company.

Getting service wrong is one of the most common reasons a statutory demand later gets challenged and set aside, so creditors often use a professional process server for individual debtors.

What Happens During the 21 Days

Once served, the debtor has 21 days to respond. During this window, the debtor can:

  • Pay the debt in full, which ends the matter.
  • Negotiate a payment plan with the creditor, if the creditor agrees.
  • Apply to set aside the demand, if there are valid grounds, such as a genuine dispute over the debt.
  • Do nothing, which allows the creditor to move toward a winding up petition or bankruptcy petition once the 21 days pass.

Ignoring a statutory demand does not make it go away. It simply moves the creditor one step closer to insolvency proceedings against you.

Can You Get a Statutory Demand Set Aside?

Yes, if you act quickly. Individuals generally have 18 days from service to apply to the court to set aside a statutory demand. Common grounds include:

  • You genuinely dispute the debt on substantial grounds.
  • You have a valid counterclaim that equals or exceeds the amount claimed.
  • The creditor holds security for the debt that covers the full amount.
  • The demand contains serious errors, such as the wrong amount or incorrect service.

Courts do not grant these applications automatically. You need a properly prepared witness statement setting out your grounds, so getting legal advice quickly matters far more here than trying to handle it alone.

What Happens if You Ignore It

If the 21 days pass with no payment, no agreement, and no successful set-aside application, the creditor can petition to make an individual bankrupt or wind up a company. For companies, this can freeze bank accounts once the petition advances. For individuals, it can lead to a bankruptcy order, affecting your credit file, your assets, and in some cases your ability to work in certain professions.

Frequently Asked Questions

Can I ignore a statutory demand if I do not owe the money?

No. Even if you dispute the debt, ignoring the demand is risky. Apply formally to set it aside within the deadline, backed by evidence of your dispute.

Does a statutory demand affect my credit file?

Not directly by itself, since it is not a court judgment. However, what follows it, such as a bankruptcy order or CCJ, can significantly affect your credit file.

How long do I have to respond to a statutory demand?

You generally have 21 days before the creditor can take further action, though if you want to apply to set it aside, that window is shorter, usually 18 days from service.

Can a statutory demand be used for a debt over six years old?

Generally no. If the debt is over six years old, it may be statute-barred, and you should get legal advice rather than assume the demand is valid.

Getting Legal Advice

If you have received a statutory demand, do not wait for the deadline to approach before acting. Our guide to winding up petitions explains what can follow for companies, and our wider guide to bankruptcy covers what can happen to individuals who do not respond in time.

This article gives general information only. It does not constitute legal advice. Always speak to a qualified insolvency solicitor immediately if you receive a statutory demand, given the strict time limits involved.