Challenging a Statutory Demand

If you dispute the Statutory Demand you may wish to seek legal advice in respect of seeking that it be set aside. You only have 18 days from the deemed date of service of the Statutory Demand to file an Application with the Court seeking to set it aside. As from 21 days after service of the Statutory Demand the creditor may petition for your bankruptcy. Whilst an Application to set aside a Statutory Demand can be filed after the 18 day period you will be at risk of a Bankruptcy Petition being validly filed during any interim period in respect of which the court has a discretion as to whether or not the same be suspended pending determination of an Application to set aside.

An Application to set aside a Statutory Demand must be made in a Form IAA. The Statutory Demand will identify which court with which the Form IAA should be.

The grounds on which an Application to set aside a Statutory Demand are set out at Rule 10.5 of The Insolvency (England and Wales) Rules 2016 which include that:-

(i)           You appear to have a counterclaim, set-off or cross demand which equals or exceeds the amount of the debt specified in the Statutory Demand;

(ii)         The debt is disputed on grounds which appear to the court to be substantial;

(iii)        It appears that the creditor holds some security in relation to the debt claimed by the Statutory Demand and the court is satisfied that the value of the security equals or exceeds the full amount of the debt;

(iv)        The court is satisfied on other grounds that the Statutory Demand ought to be set aside.

A Form IAA should be supported by a witness statement explaining the factual basis on which you say the Statutory Demand ought to be set aside by reference to the applicable grounds. This may be accompanied by an Exhibit containing copies of any documents evidencing your position. In the event of making a late Application your witness statement should include confirmation “that to the best of my knowledge and belief, the creditor(s) named in the demand has/have not presented a petition against me” and an explanation as to why you failed to apply to set aside the Statutory Demand within 18 days of service.

The court will not usually set aside a Statutory Demand if it has been served following a judgment having been obtained before another court unless paragraphs (i) and (iii) above apply.

The court will normally respond to the Form IAA within 10 working days of filing, either rejecting the same on paper without giving notice of the Application to the creditor on the basis that it is satisfied that no sufficient cause is shown for it, as will permit the creditor to issue a bankruptcy petition against you, or pass the Application to a bankruptcy registrar for listing of a hearing.

If you are successful at the hearing the Court will make an Order setting aside the Statutory Demand and the deadline for payment of the debt will be suspended. An Order setting aside a Statutory Demand must contain identification details for the debtor, the date of the hearing of the application, the date of the Statutory Demand, express provision that the Statutory Demand be set aside, details of any further order in the matter and the date thereof. If your Application is refused, time for payment (21 days) will continue to run (it does not restart). If payment is not made in time the creditor will be able to petition for your bankruptcy.