What a statutory demand actually is
A statutory demand is a formal written demand for payment of a debt, made under the Insolvency Act 1986 s.268. For individuals, it is the procedural prerequisite for a bankruptcy petition. For companies, it is the precursor to a winding-up petition.
A statutory demand can be served whether or not a court judgment exists. The creditor does not need a CCJ first. They just need to assert the debt is undisputed and over the threshold.
This is not a county court claim
A County Court claim is decided by a judge on the merits and produces an enforceable order. A statutory demand is issued by the creditor without court involvement and is procedural rather than determinative. The two routes are alternatives. Most creditors use the county court route for disputed or smaller debts; statutory demands are used for clearly owed debts above £5,000 where bankruptcy threat is the leverage.
The £5,000 threshold and other rules
Below £5,000, a creditor cannot use a statutory demand against an individual. They must take the county court route. The £5,000 figure was raised from £750 in 2015 and has remained unchanged since. For companies, the threshold is much lower at £750.
Per Insolvency (England and Wales) Rules 2016 Part 10. Multiple debts to the same creditor can be aggregated to meet the threshold. Multiple creditors cannot combine debts.
Statutory demands for disputed debts can backfire
The Insolvency Act explicitly prohibits using statutory demands as a debt-collection tool for disputed debts. If a creditor serves a statutory demand on a debt that is genuinely disputed, the court can set it aside and award costs against the creditor. Defended set-asides typically cost the creditor £2,000-£5,000 in legal fees and damages. If the demand against you involves a disputed debt, this is a powerful negotiation point.
The 21-day and 18-day deadlines
Two parallel deadlines run from the date of service. They are different and they matter for different actions.
| Deadline | What for | What happens after |
|---|---|---|
| 21 days | Pay, secure or compound the debt | Creditor can present bankruptcy petition |
| 18 days | Apply to court to set aside demand | Set aside option lost (subject to court discretion) |
| Filing set-aside | Pauses 21-day clock | Hearing date set |
| Date of service | Day the demand is delivered to you | Both clocks start |
The 18-day deadline matters more than the 21-day. If you miss the set-aside window and then realise you had a defence, you may be locked out of the easiest challenge route. Once a bankruptcy petition is presented, your options narrow significantly. Always check the exact date of service and calculate both deadlines on receipt.
Personal service is the safest route for creditors
The Insolvency Rules require personal service unless the creditor has tried and failed. Email service alone is not valid. If a statutory demand reaches you only by email or only by post left in a general mailbox without proof of personal delivery, the demand may be defectively served, providing a ground to set aside. Document carefully how and when you received it. Insolvency Rules 2016 r.10.2 sets out service requirements.
Your four options on receipt
You have four practical responses to a statutory demand. Each has different consequences and costs. Choose carefully and quickly.
If you accept the debt and can pay, this is the cleanest exit. Pay by traceable method (bank transfer, recorded letter cheque) and get written confirmation that the demand is withdrawn. Keep all evidence permanently.
The Insolvency Act allows you to "compound" the debt, that is, agree alternative terms with the creditor that satisfies them. Could be instalments, partial settlement and security on remaining, or any other agreed arrangement. Get this in writing before the 21-day deadline. Most creditors prefer this to court action. See our negotiating with creditors guide.
If you have valid grounds (genuine dispute, counterclaim, defective demand, etc.), file form IAA at the court named on the demand. Application is free if you are on means-tested benefits. The court fee is otherwise £303. Filing pauses the 21-day clock until the application is heard.
If you genuinely cannot pay and the debt is real, voluntary insolvency (Debt Relief Order if you qualify, IVA, or own bankruptcy application) may be cheaper and less damaging than waiting for a creditor's bankruptcy petition. Costs less, gives you more control over timing. See our UK debt solutions guide.
Do not ignore a statutory demand
The single worst response is silence. After 21 days the creditor can present a bankruptcy petition. Bankruptcy proceedings are public, expensive (~£1,500+ in fees that go on the bankruptcy debt) and much harder to challenge than the original demand. Even if you have no defence and cannot pay, file for your own bankruptcy or DRO instead, you keep more control.
Grounds to apply for set aside
The court will set aside a statutory demand on certain specified grounds under Insolvency Rules 2016 r.10.5. Your application must be supported by witness statement evidence.
Per Insolvency Rules 2016 rule 10.5. The most successful set-asides are based on genuine disputes and counterclaims, technical defects alone are usually corrected and re-issued.
If the debt is from a CCJ, set aside the CCJ first
If the statutory demand is based on an unsatisfied County Court Judgment, you cannot challenge the underlying debt at the set-aside hearing, the court will say the validity has already been determined. To challenge the debt itself, you must first apply to set aside the CCJ (see our debt going to court guide). Only if the CCJ is set aside can you then challenge the statutory demand on the same grounds.
Get advice from Citizens Advice or a Law Centre before filing. Strong grounds and weak presentation lose. Weak grounds can sometimes succeed if presented well. The witness statement is the key document, it must lay out the facts clearly and the legal basis precisely.
What happens if you ignore it
The consequences of ignoring a statutory demand are serious and follow a quick timeline. After 21 days, the creditor can present a bankruptcy petition. After that, your options narrow rapidly.
Bankruptcy petition fee: ~£302 court fee and £1,500 deposit (paid by creditor, recoverable from your estate if successful). The creditor names you as defendant in formal insolvency proceedings.
You receive the bankruptcy petition documents. A first hearing date is set, usually 6-12 weeks ahead. You can still pay or settle in this window, but the court costs are higher and your credit file is already damaged.
The court considers the petition. If undisputed and the debt is established, a Bankruptcy Order is made. Your assets vest in the Official Receiver or Trustee in Bankruptcy. Public records, FCA registers and credit files all update.
Most UK bankruptcies are automatically discharged after 12 months. Some assets sold to pay creditors. Bankruptcy stays on the Insolvency Register for 3 months after discharge, on credit file for 6 years from the bankruptcy order date.
Bankruptcy by creditor's petition is the worst outcome
It is the costliest, most damaging and least controllable form of UK insolvency. You lose control of timing, asset disposal and narrative. By contrast, your own bankruptcy application costs ~£680 and gives you control. A Debt Relief Order (DRO) costs £90 and avoids bankruptcy if you qualify. An IVA can give 5-year structured repayment with most debts written off. Almost any voluntary route is better than waiting for a creditor's petition. See UK debt solutions compared.
From statutory demand to bankruptcy petition
The path from demand to bankruptcy is procedural and follows fixed steps. Understanding the timeline helps you act in time.
Personal service or other valid form. Both clocks start: 18 days to set aside, 21 days to comply.
Last day to file IAA application without leave of the court. Late applications can sometimes succeed but are at the court's discretion and need good explanation for the delay.
Last day to pay, secure and compound the debt. After this, the creditor can present a bankruptcy petition. Filing a set-aside application before day 18 pauses this clock.
Creditor files Form Bank 1 (Bankruptcy Petition by Creditor) at court. Pays deposit and court fee. Petition is served on you. First hearing scheduled.
Court considers the petition. If you have not made arrangements or paid, the court typically makes a Bankruptcy Order. You can apply to dismiss the petition if you have paid the debt or proposed an alternative arrangement that the creditor accepts.
You can still settle right up to the bankruptcy hearing
Even after the petition has been presented, paying the debt and the creditor's costs causes the petition to be dismissed. You can also propose an IVA at the hearing, which the court will consider. Bankruptcy is not automatic just because the creditor has petitioned, the court still needs to make a Bankruptcy Order. Last-minute settlements happen, though by this stage you have already incurred court costs and credit file damage.
Spotting a defective statutory demand
Statutory demands are technically demanding to draft. Many defects exist in actual demands served by creditors. A defective demand may give you grounds to set aside even where the debt itself is real.
Per Insolvency Rules 2016 r.10.1 and r.10.2. Even minor defects can support a set-aside if they cause prejudice. The court considers whether the defect prevents you from understanding what you need to do.
Take the demand seriously, take advice immediately
A statutory demand is the closest most UK adults will ever come to formal insolvency proceedings. The deadlines are tight, the consequences serious and the procedure unforgiving of mistakes. Get free advice from StepChange or National Debtline on day 1. Pay if you can within 21 days. Negotiate if you can. Apply to set aside within 18 days if you have grounds. Consider voluntary insolvency routes if neither works. Never ignore. The path from demand to bankruptcy can be as short as 60 days and as costly as your house. See companion guides on UK debt solutions and negotiating with creditors.