HOW LONG DOES A DEBTOR HAVE TO RESPOND TO A STATUTORY DEMAND?
- Tracenet Legal Services
- 3 days ago
- 4 min read
Introduction
Statutory demands remain one of the most direct and cost-effective pre-insolvency tools available to creditors in the UK. They provide a formal notice that a debt is due and demand payment within a strict timeframe — failure to comply is strong evidence of insolvency and can lead directly to bankruptcy for individuals or a winding-up petition for companies.
However, the power of a statutory demand depends entirely on respecting the precise legal deadlines laid out in the Insolvency Act 1986 and supporting procedural rules. Any misunderstanding or miscalculation can waste time, incur unnecessary legal costs, and weaken a creditor’s enforcement position.
In this guide, Tracenet Legal Services explains exactly how long a debtor has to respond, the consequences of missing the statutory deadline, and practical steps creditors should take to protect their recovery rights and avoid costly procedural pitfalls.
We serve Statutory Demands, Nationwide.
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Contents
Understanding Statutory Demand Deadlines
A statutory demand imposes two clear deadlines on debtors:
✅ Individuals:
18 days to apply to set aside the statutory demand at court.
21 days to pay the debt in full or agree settlement terms.
✅ Companies:
21 days to pay the debt or come to an acceptable arrangement. Companies cannot apply to “set aside” a statutory demand but may seek to restrain a winding-up petition if grounds exist.
Note: Deadlines run from the date of valid personal service, which is why correct service is essential.
Timeframes for Individuals
Under section 268(1) of the Insolvency Act and Part 10 of the Insolvency (England and Wales) Rules 2016, an individual must:
Within 18 days:
File an application to set aside if they dispute the debt or argue the demand is defective.
Within 21 days:
Pay the debt in full or settle by agreement. After this period, the creditor is entitled to petition for bankruptcy, provided service and procedural requirements are met.
Timeframes for Companies
For companies, section 123(1)(a) of the Insolvency Act applies:
The debtor company has 21 days to comply with the statutory demand.
Failure to pay within this period is prima facie evidence that the company is unable to pay its debts, allowing the creditor to present a winding-up petition.
What Happens If the Debtor Misses the Deadline?
✅ For Individuals:
If no valid set-aside application is filed within 18 days and no payment is made within 21 days, the creditor may proceed with a bankruptcy petition.
✅ For Companies:
Non-payment after 21 days creates a presumption of insolvency. The creditor may file a winding-up petition at court. The petition must comply with strict procedural requirements, including proper advertising and notice to other creditors.
Ignoring a statutory demand is never wise — it removes the debtor’s leverage and strengthens the creditor’s enforcement position.
Next Steps for Creditors After the Deadline
Verify Service:
Ensure the demand was properly served — courts scrutinise this closely.
Confirm Payment Status:
Check for partial payments or last-minute offers. Always document the debtor’s response or silence.
Prepare Petition:
File the bankruptcy or winding-up petition immediately after day 21 if no settlement is reached. Use all supporting evidence and maintain a clear paper trail.
Act Without Delay:
Delay can damage credibility and may give the debtor an opportunity to dissipate assets.
Creditor Best Practices
✅ Use a professional process server to guarantee valid service and robust evidence.
✅ Keep detailed records — invoices, contracts, payment history, and all correspondence.
✅ Diarise deadlines to avoid premature or late petitions.
✅ Do not threaten statutory demands for genuinely disputed debts — this can result in cost sanctions.
✅ Seek legal advice promptly if the debtor disputes the debt or files a late set-aside application.
Relevant Legislation and Rules
Insolvency Act 1986:
Section 123(1)(a) — company insolvency basis.
Section 268(1) — individual bankruptcy basis.
Insolvency (England and Wales) Rules 2016:
Part 7: Companies.
Part 10: Individuals.
Practice Direction — Insolvency Proceedings:
Additional procedural guidance.
FAQs
1️⃣ How strict are the statutory demand deadlines?
Courts apply these deadlines strictly. Late set-aside applications are rarely accepted without strong justification.
2️⃣ Can the debtor pay after 21 days?
Yes, the creditor may accept late payment, but once a petition is filed, it may proceed unless withdrawn by agreement.
3️⃣ Can a debtor negotiate during the 21 days?
Yes — debtors can offer settlement or payment plans before the petition stage. Get any agreement in writing.
4️⃣ Does improper service affect deadlines?
Yes — improper service can render the demand invalid, resetting deadlines. Use professional service to avoid this.
5️⃣ Is a statutory demand listed on credit reports?
No, but bankruptcy or liquidation proceedings resulting from non-compliance will appear on public records and affect creditworthiness.
Real-World Example
A regional wholesale supplier served a statutory demand upon a small catering business for unpaid stock worth £25,000. Tracenet Legal Services handled the process service, ensuring personal service upon the director at both the registered address and trading premises. Post service, the debtor company ignored the demand entirely and failed to settle within the statutory 21-day deadline.
On day 23, the supplier’s solicitor filed a winding-up petition against the debtor company. At the subsequent court hearing, the debtor company argued that cash flow difficulties prevented payment but failed to present any credible evidence disputing the debt. The court determined insolvency was proven, granted the winding-up order, and appointed the Official Receiver to liquidate company assets to recover funds. The Company Directors also faced further scrutiny for continuing to trade while insolvent — highlighting the serious legal and reputational consequences of ignoring a properly served statutory demand.
Statutory demand timeframes are a critical part of UK insolvency law and must be respected by both debtors and creditors. For creditors, failing to understand or comply with these deadlines can derail debt recovery efforts. For debtors, ignoring a statutory demand can lead directly to bankruptcy or compulsory liquidation.
Working with an experienced partner like Tracenet Legal Services ensures statutory demands are served correctly, deadlines are monitored, and petitions are prepared in full compliance with the law — maximising the chances of a successful recovery.
📞 Contact Tracenet Legal Services for professional advice and support.
We serve Statutory Demands, Nationwide.
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