WHAT HAPPENS AFTER A STATUTORY DEMAND IS SERVED?
- Tracenet Legal Services
- Jun 20
- 5 min read
Introduction
Serving a statutory demand is one of the most effective tools for creditors to enforce payment of clear, undisputed debts. However, once served, a precise legal clock begins ticking — and any failure to act properly can weaken a creditor’s position and waste time and money.
Creditors, solicitors and debt recovery professionals must understand exactly what happens next, how debtors can respond, and how to escalate correctly to bankruptcy or winding-up proceedings if the debtor fails to comply.
In this comprehensive guide, Tracenet Legal Services explains what happens after a statutory demand is served, what ‘setting aside’ really means, what counts as a secured debt, and how our Certificate of Service protects your enforcement rights in court.
We serve Statutory Demands, Nationwide.
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Contents
Immediate Legal Effect of Serving a Statutory Demand
Once properly served:
The debtor is formally put on notice that the debt is due and must be settled immediately.
Statutory timeframes begin: Individuals have 18 days to apply to set aside, 21 days to pay. Companies have 21 days to pay or negotiate.
For companies, failure to pay within 21 days creates a statutory presumption of insolvency under Section 123(1)(a) of the Insolvency Act 1986, allowing creditors to file a winding-up petition.
Correct service — backed by a signed Certificate of Service — is essential. Courts expect clear documentary proof that service was lawful and valid.
Debtor’s Options After Service
When a debtor receives a statutory demand, they generally have four legal options:
✅ 1️⃣ Pay in Full
Many debtors settle immediately to avoid insolvency proceedings.
✅ 2️⃣ Propose a Settlement
Debtors may offer a payment plan or negotiate a reduced amount. Creditors should:
Confirm terms in writing.
Monitor compliance closely.
Avoid repeated delays without tangible guarantees.
✅ 3️⃣ Apply to Set Aside (Individuals Only)
What ‘Set Aside’ Means:
For individuals, setting aside a statutory demand means asking the court to cancel it, treating it as if it were never served. If granted, it removes the legal foundation for bankruptcy.
Valid reasons include:
A genuine dispute over the debt.
A valid counterclaim equal to or greater than the demand.
A serious defect in how the demand was drafted or served.
Note: Mere inability or unwillingness to pay is not a valid grounds.
Debtors must apply within 18 days of service. If they do, the creditor must wait for the court’s decision before petitioning for bankruptcy.
✅ 4️⃣ Do Nothing
If the debtor ignores the demand entirely, the creditor is free to escalate immediately after the statutory deadline expires.
Creditor’s Next Steps — Practical Guide
After serving a statutory demand:
✅ Track Deadlines:
Diarise the 18-day and 21-day milestones.
✅ Keep Records:
Document all debtor responses, partial payments, or negotiations.
✅ Prepare to Petition:
When the deadline passes with no valid set aside or payment:
Individuals: File a bankruptcy petition in the appropriate County Court with insolvency jurisdiction.
Companies: File a winding-up petition at the High Court (Companies Court) or regional Business and Property Court.
✅ Gather Supporting Documents:
Include:
The original statutory demand.
Tracenet’s signed Certificate of Service.
A sworn or affirmed Witness Statement verifying non-payment.
✅ Advertise Properly:
For companies, advertise the winding-up petition in the London Gazette at least seven business days before the hearing, but not more than seven days after service.
✅ Consult Trusted Professionals:
A process server alone is not enough. Combine proper service with expert legal guidance to avoid fatal mistakes.
Common Pitfalls and How to Avoid Them
❌ Improper Service:
Always instruct a certified process server who issues a compliant Certificate of Service. Unclear service can invalidate the demand.
❌ Premature Petitioning:
Do not file before the 21-day period ends.
❌ Advertising Errors:
For company petitions, incorrect or late Gazette ads can cause dismissal.
❌ Debtor Delay Tactics:
Debtors sometimes file last-minute restrain applications. Keep complete proof and evidence to counter these.
❌ Using a Statutory Demand for Secured Debts:
A secured debt is backed by an asset (e.g. mortgage on a property, car finance). The creditor must enforce their security first. Using a statutory demand for a secured debt risks strike out and wasted costs.
How to Petition for Bankruptcy or Winding Up
✔️ Where to File:
Bankruptcy: County Court with insolvency jurisdiction.
Winding up: High Court (Companies Court) or relevant Business and Property Court.
✔️ Key Documents:
Statutory demand.
Tracenet’s Certificate of Service.
Witness statement verifying debt and non-payment.
Proof of debt (invoices, contract).
✔️ Public Notice:
Advertise company winding-up petitions in the London Gazette in line with strict deadlines.
✔️ Court Deposit:
Pay the required deposit to HMCTS for processing the petition.
FAQs
1️⃣ What does ‘set aside’ mean?
It means the debtor applies to cancel the statutory demand. If successful, the demand has no effect and you cannot rely on it for bankruptcy. Valid reasons include a genuine dispute or procedural error — not just inability to pay.
2️⃣ What is a secured debt?
A secured debt is backed by an asset (e.g. mortgage, vehicle). For secured debts, statutory demands are usually inappropriate because the creditor must enforce security first.
3️⃣ What is a Certificate of Service?
It is a signed, court-compliant document issued by your process server confirming when, where, how, and to whom the statutory demand was served. Tracenet Legal Services provides a precise Certificate of Service for every job — trusted by UK law firms.
4️⃣ How soon can I petition after serving?
On day 22 if there is no valid set aside or payment.
5️⃣ What if the debtor tries to restrain my petition?
Maintain complete records. Courts expect robust evidence that service was valid and the debt is undisputed.
Real-World Example
A commercial cleaning supply company used Tracenet Legal Services to serve a statutory demand upon a national restaurant chain for unpaid invoices of £18,500. Tracenet personally served the demand at the registered office and issued a signed Certificate of Service.
The debtor promised payment but failed to follow through. On day 22, the creditor’s solicitor filed a winding-up petition at the High Court, supported by the Certificate of Service and a sworn witness statement. The petition was advertised in the London Gazette per the Rules.
At the hearing, the debtor attempted to claim cash flow difficulties but provided no genuine dispute. The court granted the winding-up order, an Official Receiver was appointed, and some debt was recovered through asset sale. The directors faced questions about wrongful trading — proving that correct service, a valid Certificate of Service, and precise follow-up secure a creditor’s legal advantage.
Conclusion & Why Choose Tracenet
Serving a statutory demand is just step one — enforcing it properly is what delivers real results.
Tracenet Legal Services is trusted by leading UK law firms and debt recovery practitioners and creditors to:
Serve demands nationwide, correctly and on time.
Produce precise Certificates of Service accepted by UK courts.
Provide sworn proofs of service if needed.
Monitor statutory deadlines.
📞 Contact Tracenet Legal Services — protect your position and enforce with confidence.
Welcome to Tracenet Legal Services. Since 2015, we have managed and effected the service of thousands of Statutory Demands upon debtors across the Country.
We are a multi-award-winning and industry-leading UK Process Server of Statutory Demands, providing Business-to-Business Support, Litigation, and Insolvency Support Services to UK Debt Recovery professionals and Legal Teams.
If you need assistance in serving a Statutory Demand upon an Individual or Company, please call us on 0800 048 5684 or contact us for a fixed fee, Nationwide service.
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