I’ve received a Statutory Demand or Bankruptcy Petition
Receiving a Statutory Demand can be daunting, but it doesn’t have to spell the end of the road for your sole trader business.
A Statutory Demand is, in simple terms, a formal request for payment. It is an official form which details who you owe the money to, how much you owe and the conditions of payment, including when it is due. Although it is an official form, the court is not involved in issuing statutory demands; they are issued by the creditor themselves. There needs to be proof of ‘service’ (of a debtor being ‘served’ the Statutory Demand), a process server is usually employed to deliver or serve the demand.
What action do I need to take if I’ve been served with a Statutory Demand?
If you have been served with the Statutory Demand, you can challenge it’s validity by attending court and asking for it to be set aside. If the demand is valid, you can apply for an interim order of up to 56 days in which to look for a solution or repayment agreement If you do not respond to the Statutory Demand within 18 days, your creditor can ask the court to petition you for bankruptcy. If you are happy for the bankruptcy to take place, the creditor who petitioned you will have to meet the costs of making you bankrupt, which are currently £5000.
What can McAlister & Co do to help if I’ve been served with a Statutory Demand?
McAlister & Co, acting in their capacity as Insolvency Practitioners, can apply for an interim order to give some breathing space to either get the necessary money together to pay the debt, or come to a repayment arrangement with your creditor. We are also able to put you back in control of the situation by arranging a debt solution for you. Many of our debt solutions, such as an IVA for Sole Traders will allow you to carry on trading and protect any assets, such as your home.
How can an IVA help if I’ve been served with a Statutory Demand?
An IVA will be preferable to bankruptcy as it will better protect any assets, such as your home, and will also mean that you will, in most cases, be able to continue trading. An IVA will reduce the monthly repayments on your unsecured debt for a fixed period, and any remaining debt will be written off at the end of the IVA period (typically five years).
How can a DMP help if I’ve been served with a Statutory Demand?
A DMP can reduce your monthly repayments to your creditors, giving you the necessary breathing space to get back on your feet and improve your financial situation. It won’t reduce the total of the amount you owe, but it is an agreement with your creditors to pay a lower monthly amount. If the creditor who served the Statutory Demand is owed an unsecured debt, they can be included in the DMP.
Are there any other options?
The creditor may accept a reduced amount of the total debt in a lump sum as a Full and Final Settlement, or you can also choose to allow the Statutory Demand and subsequent Bankruptcy Petition to go ahead uncontested. If a creditor is seeking to make you bankrupt, they will need to meet the court costs of £750, whereas opting for bankrupting yourself would mean you would need to pay court costs of £650 yourself.
McAlister & Co are experienced at helping clients find the best path for their circumstances. No two clients are the same, so get in touch and we can tailor a debt solution to suit your needs. All initial debt advice is free and of course, confidential.