WHAT HAPPENS IF, ONCE SERVED, A STATUTORY DEMAND IS IGNORED
- Tracenet Legal Services
- 6 days ago
- 3 min read
Introduction
Serving a statutory demand is a serious step for creditors — and ignoring one is a risky mistake for debtors. Statutory demands are not idle threats; they are formal legal notices under the Insolvency Act 1986 that can quickly lead to bankruptcy or a winding-up petition if left unanswered.
This article explains exactly what happens if a debtor ignores a statutory demand and why using a professional process server like Tracenet Legal Services protects your right to enforce it.
Contents
• Introduction
• What Ignoring a Statutory Demand Means
• Legal Consequences for Individuals
• Legal Consequences for Companies
• How Creditors Enforce a Statutory Demand
• FAQs
• Real-World Example
• Conclusion
What Ignoring a Statutory Demand Means
When a debtor ignores a validly served statutory demand, it signals to the court that the debtor is unable or unwilling to pay an undisputed debt. This provides grounds for the creditor to escalate enforcement:
• For individuals: It opens the door to petition the court for the debtor’s bankruptcy.
• For companies: It provides evidence to file a winding-up petition, aiming to liquidate the business and recover unpaid debts from its assets.
Ignoring a statutory demand can also limit the debtor’s options to dispute the debt later.
Legal Consequences for Individuals
Under Section 268(1) of the Insolvency Act 1986, if an individual fails to respond to a statutory demand within 21 days, the creditor can present a bankruptcy petition. This means the court may declare the debtor bankrupt, appoint a trustee, and seize the debtor’s assets to repay creditors.
Key points:
• The debtor loses control over their finances.
• Their assets can be sold to pay debts.
• Bankruptcy is recorded publicly, affecting future credit and business dealings.
Legal Consequences for Companies
Under Section 123(1)(a) of the Insolvency Act 1986, a company that does not pay a statutory demand for £750 or more within 21 days is presumed insolvent. This allows the creditor to petition for a winding-up order.
If granted:
• The company is placed into compulsory liquidation.
• An official receiver or liquidator is appointed to sell assets and pay creditors.
• Directors may face investigation for misconduct if insolvency is mishandled.
How Creditors Enforce a Statutory Demand
✅ Step 1: Wait 21 Days
By law, the debtor must be given 21 days to respond or pay after valid service.
✅ Step 2: File a Petition
• For individuals: apply to the court for a bankruptcy order.
• For companies: apply to wind up the company.
✅ Step 3: Attend Court Hearing
The court will review whether the debt is genuinely undisputed and whether the statutory demand was served correctly.
✅ Step 4: Enforcement
If approved:
• The individual’s assets can be seized and distributed.
• The company is liquidated and dissolved.
FAQs
1️⃣ Can a debtor ignore a statutory demand without consequences?
No. Ignoring it gives the creditor stronger grounds to prove insolvency and escalate enforcement. Courts take non-response seriously.
2️⃣ Can the debtor dispute the debt after ignoring the demand?
They may try, but the burden shifts to them to convince the court that a genuine dispute exists. It’s harder once deadlines pass.
3️⃣ What if the debtor pays after the deadline?
Late payment may stop a petition if the creditor accepts it, but costs already incurred may still be recoverable.
4️⃣ How soon can creditors file a bankruptcy or winding-up petition?
Immediately after day 21 if no payment or application to set aside has been made.
5️⃣ Does ignoring a statutory demand affect credit records?
The demand itself is not recorded, but bankruptcy or liquidation resulting from it is a matter of public record.
6️⃣ How does using a process server help?
Professional servers ensure valid service and provide proof, which is essential if the debtor claims they never received the demand.
Real-World Example
A creditor served a statutory demand on a company that repeatedly ignored payment requests. After 21 days, the creditor filed a winding-up petition. The court granted the order, the company was liquidated, and its directors faced personal investigation for mismanagement. This shows how ignoring a statutory demand can end a business altogether.
Conclusion
Ignoring a statutory demand is never wise for debtors — and for creditors, it’s a clear legal trigger to take decisive action. The key is ensuring the demand is properly served and documented.
At Tracenet Legal Services, we help law firms and creditors across the UK serve statutory demands correctly, document every step, and protect their right to enforce debts swiftly and legally.
📞 Contact Tracenet Legal Services today for professional support.
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