Statutory Demands – an effective debt collection tool
Sadly, it is becoming a business reality that invoices and overdue accounts are nearly always paid late. One reason for this is that businesses have monthly account payment cycles and a few weeks’ delay is now perceived as the norm. However, there may be occasions where you are dealing with a business debtor or an […]
Sadly, it is becoming a business reality that invoices and overdue accounts are nearly always paid late. One reason for this is that businesses have monthly account payment cycles and a few weeks’ delay is now perceived as the norm. However, there may be occasions where you are dealing with a business debtor or an individual where the debt drags on and you have serious doubts about their intention, and not their ability to pay. The threat that a debtor can be made bankrupt if they ignore a statutory demand and that it can adversely affect a businesses’ credit rating, can often spark a debtor into action, which is why Daniels Silverman believe it is such an effective debt recovery tool.
At Daniels Silverman, we find Statutory demands a highly effective debt collection tool and use them on debtors who are financially viable as they are not something that can be ignored. Once the debtor has been ‘served’ with a statutory demand they will generally prioritise payment of the debt or at very least make arrangements to pay. At present Daniels Silverman issue around 30 to 40 statutory demands every month and around 75% of those served pay something immediately or make arrangements to pay.
What is a statutory demand?
A Statutory Demand is a Legal document and final request that your debt be paid. It is not the same as a “final demand”, which is a letter advising the debtor that they need to pay and stating what would happen if they didn’t.
A statutory demand is prepared under the Insolvency Act 1986. Certain information, such as clear details of how the debt arose, the total amount being claimed and the amount of interest claimed, must always be contained in a statutory demand. A statutory demand cannot be used if the amount claimed is below £750.
There are two main types of statutory demand. The first is known as a ” Statutory Demand under section 268(1)(a) of the Insolvency Act 1986 – Debt for Liquidated Sum Payable Immediately“. This type of statutory demand is used in the ordinary situation of the debtor owing you a sum of money.
The second type is a ” Statutory Demand under section 268(1)(a) of the Insolvency Act 1986 – Debt for Liquidated Sum Payable Immediately Following a Judgment or Order of the Court“. This type of statutory demand is used where you have already taken the debtor to court for non-payment of the debt, successfully obtained a court judgment against the debtor and wish to enforce that court judgment against the debtor using the statutory demand process.
The court is not involved in the preparation and service of a statutory demand, so no court fee is payable. Statutory demands have to be professionally prepared and served on the debtor. At Daniels Silverman, the legal team prepares the demand and it is checked to ensure it is fully compliant. After the statutory demand has been prepared it must be served on the debtor personally, should it be a company then this is served at the registered office address stated on companies house. This means handing the document personally to the debtor, usually through a process server (usually ex-police officers) or bailiff. If a debtor proves hard to track down, there are formal procedures available to bring the statutory demand to the debtor’s attention by alternative means, such as delivering it to their business address or their solicitor. The debtor then has 21 days to then pay the undisputed debt.
Why are statutory demands effective?
The effects of a statutory demand are severe and cannot be ignored.
Once the statutory demand is served, the debtor has 18 days to formally dispute the debt.
If there is no dispute of the debt, the debtor has 21 days from the date they were served with the statutory demand to do one of the following:
- Pay the amount claimed,
- Offer to secure the amount claimed with property, or
- Make some other offer of settlement, for example, payment by instalments.
If the debtor does not dispute the debt or satisfy the debt in one of the three ways specified above, you can petition to make the debtor bankrupt. This is the main reason statutory demands are so effective in dealing with problem debtors. The consequences of bankruptcy are serious, including debtors having to sell their property to pay their debts and getting poor credit references. Because of this, where there is no dispute about the debt, debtors will usually try to avoid bankruptcy after being served with a statutory demand by paying the debt in full or coming to some other arrangement satisfactory to the creditor. Either way, one of the main problems with debt recovery – being ignored by the debtor – is often overcome by serving a statutory demand.
For businesses, ignoring a statutory demand would be unacceptable as it would be tantamount to professional suicide – the start of insolvency proceedings. A limited company director ignoring a demand, risks their conduct being criticised by the Official Receiver and proceedings banning them from managing a company being started.
Can I use it for any debt?
Statutory demands are the ideal method of collecting any debt, where there is no genuine dispute and the sum owed is for £750 or more. However, they are not necessarily suitable for complicated matters where the amount to be recovered is uncertain.
How do I get my statutory demand issued?
CONTACT OUR CUSTOMER SERVICE TEAM STRAIGHT AWAY – the demand could be handed to your debtor in as little as three days later!