Bankruptcy Petition after statutory demand

One of the conditions of being able to present a Bankruptcy Petition is that the debtor is unable to pay its debts and has either ignored or failed to set aside a statutory demand for the debt, which has been served on them by the creditor.

If an individual owes you money and you believe that the debt is not disputed, often the first stage in the bankruptcy process is for the creditor to serve a statutory demand on the debtor. This provides the debtor with a period of 21 days to pay the debt. If they fail to do so, their non-failure to pay the statutory demand is good evidence to show to a court that the debtor is unable to pay its debts and therefore should be declared bankrupt.

If a debtor disputes the debt, they should apply to set it aside. They only have 18 days from the date of service of the statutory demand to make an application to set aside the statutory demand. If they have made an application to set aside the statutory demand, then the creditor cannot proceed with a bankruptcy petition until such time as the set aside application has been dealt with by the court.

If however, there is an undisputed amount exceeding £5,000 owed by the debtor to the creditor, the creditor can proceed with the bankruptcy petition.

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