Release date: May 2009

Kelly Henderson, a debt recovery specialist at Close Thornton, outlines the main benefits of Statutory Demands as a cost-effective way of recovering outstanding debts.

A Statutory Demand (SD) is effectively a form which sets out the amount due to the Creditor, the time within which the demand must be complied with, the methods of compliance available and the consequences of not complying with the demand.

A Statutory Demand can be the first step towards making the debtor bankrupt, if an individual, or the Winding up of a Company. However, the serving of a SD generally focuses the debtor on paying the debt as the consequences of not complying with the Demand can be detrimental. It can lead to a Petition being issued, which in turn can trigger a domino effect on borrowing as the debtor's bank facilities are generally suspended until the Petition is either withdrawn or determined by the Court.

A SD can be used if the outstanding debt is £750 or more and the amount due is a 'liquidated amount'. A SD cannot be used in respect of a claim for damages or a claim for an account and payment.

The Debtor only has a limited period of time to comply with the SD before the Creditor can take the next step and issue a Petition for Bankruptcy or a Winding Up Order.

Within 21 days of service of the demand, the Debtor or Company must:
• pay the amount due
• offer security for the debt
• offer to pay by way of instalments that is satisfactory to the Creditor

The SD procedure does not involve the Court and there are no Court fees payable. Therefore it can be a very cost-effective way of recovering outstanding debts, so long as the Creditor is sure that the debt is contractually due and the Debtor has the means to pay the amount due.

For specific advice on debt recovery, contact Kelly Henderson direct at kelly.henderson@close-thornton.co.uk or call 01325 466461.

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