What should I do if I receive a statutory demand?

A statutory demand is made under the Insolvency Act 1986 and requires you to pay the debt, secure it, or agree a settlement to the creditor's reasonable satisfaction. It must be for a fixed sum of at least £5,000 for an individual and is normally served personally. Left unanswered for 21 days, it creates a presumption of insolvency — which is exactly what makes a bankruptcy petition straightforward for the creditor.

Your options inside the deadline

1. Pay in full and get written confirmation that the demand is satisfied.
2. Negotiate. Propose an arrangement and insist on written confirmation that no bankruptcy petition will be presented while you keep to it — agreeing terms does not by itself cancel the demand.
3. Apply to set it aside, which must be done within 18 days of service, not 21, to leave room for the court process.
4. Get Breathing Space through a debt adviser. This pauses a petition that has not yet been presented and buys time for advice, though it does not set the demand aside.

Setting a demand aside

Application is made to the court on the insolvency application form. The grounds are: a genuine dispute about whether the debt is owed — including that it is statute-barred, was already paid, or is the wrong amount; a counterclaim or set-off equal to or greater than the demand; the creditor already holds adequate security, such as a mortgage; or a technical defect in the form, figures or service.

The threshold is deliberately low. You do not have to prove you would win, only that there is a genuine and substantial dispute — because a statutory demand is not meant to be a debt collection tool for contested debts. Courts take a dim view of creditors who use it that way and can penalise them in costs.

If nothing happens within 21 days, the creditor may present a petition at any point in the following four months, after which the demand expires. Many never do — the demand is often pressure rather than intent — but you cannot safely assume that. Bankruptcy hands your assets, potentially including your home, to a trustee, is recorded on your credit file for six years, bars you from certain roles, and discharges you after a year. For some people with unmanageable debts and no assets that is a genuine fresh start, but it should be a choice rather than a default. Get free advice from Citizens Advice, StepChange or an insolvency practitioner the week the demand arrives.