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A statutory demand requires that the debtor either:
Some creditors use statutory demands as a way of persuading debtors to pay off the debt, usually by borrowing elsewhere.
However, statutory demands should be taken seriously. After 21 days the creditor can petition for a bankruptcy order. Therefore, it is usually worth contacting the creditor by telephone and asking them what their next step will be.
Ignoring a statutory demand may encourage the creditor to petition for bankruptcy. It is worth bearing this in mind, particularly if the debtor is contemplating petitioning for his own bankruptcy.
If the debtor wants to avoid bankruptcy he should consider:
Setting aside a statutory demand.
21 days after the serving of the statutory demand, the creditor can petition for the debtors bankruptcy unless it has been set aside.
An application to set aside the statutory demand can be made if:
An application to set aside must be made with 18 days of the statutory demand being served. Forms 6.4 (application) and 6.5 (affidavit) must be completed and taken to the court. However, the court can dismiss the application if there are no grounds.
If there are grounds, a hearing will be arranged at which the court will decide whether the demand will be set aside.
If the debt falls under the Consumer Credit Act 1974, the court should also consider if any relief is available to the debtor under the Act.
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