A statutory demand letter is just another letter asking for money, right?
A statutory demand is not just another letter, it is the formal precursor to insolvency action being started against you. If you do not respond to a statutory demand within the set time frame you may lose the opportunity to raise disputes about the debt being claimed from you. A statutory demand can be issued against a company as well as an individual, but this discussion only relates to individuals.
A statutory demand can only be served on you if the debt is both undisputed, for a fixed sum over £5,000 and the debt is not secured by other means. If the debt is either genuinely disputed or you have a counter-claim whereby money owed to you brings the balance of the debt under £5,000 then you can apply to the court to have the demand set aside entirely. This would force your creditor into a legal process where you can defend the claim on the basis of the disputes that you have. There is a strict deadline of 18 days from the service of the demand for you to apply to the Court.
If you do not respond to the demand within 18 days, you may face a bankruptcy petition and defending such a claim becomes much harder. If you are served with a statutory demand it is serious matter and you should take legal advice. If you ignore the demand, matters will, most likely, get both worse and more costly rather than disappear.
Many creditors use a statutory demand in order to bully the debtor into payment so as to avoid the threat of bankruptcy. However, a statutory demand must be used in the correct manner and not purely as a debt recovery tool. The misuse of a statutory demand can result in the debtor recovering the legal costs, that they incur in setting aside the statutory demand, from the creditor.
Therefore, rather than feeling either overwhelmed or bullied, take some further advice so as both to establish that the correct legal process is being followed and what options you have.
For further information, please contact Nick Stockley.