Statutory Demands

Statutory demands are formal documents, issued by a creditor to a debtor for an unsecured debt. This document informs the debtor that he is given 21 days to pay his debt.

The debtor is given the choice to pay the corresponding amount in full, secure the loan with an asset, or pay the amount in installments. After 21 days, without action from the debtor, the creditor may petition the debtor's bankruptcy.

These statutory demands for bankruptcy are the creditors way of forcing the debtor to pay up. While some people choose to file for bankruptcy to be relieved of debts, there are some who cringe at the very thought of it.

This is why statutory demands are so effective. Most people get intimidated by the statutory demand and end up acquiring new loans to pay for his existing loan. Some creditors resort to publicly announcing the demand in websites.

This act can be very harmful to a person's credibility - affecting not only his financial concerns, but also his personal reputation.

Unless the debtor is considering a bankruptcy application, he should never shrug off the idea or receiving statutory demands. For bankruptcy petitions to be avoided, the debtor must act on the demand - either by paying the creditor or looking for other options to appease them.

You may consult a lawyer specializing in this area to advice you on what steps to take.

If you decide to pay out the whole amount, you will have to inform the local court of your plan to pay up and contact the creditor for instructions on what how to go about doing so.

If you cannot afford to pay out the total amount, offer reducing the amount significantly before paying out the rest or inquire the debtor for the possibility of installment payment systems. If you the creditor sees your sincere interest in wanting to pay out, he might even offer a reduced amount for the settlement for the debt.

Another way of dealing with a statutory demand for bankruptcy is by "setting it aside". You must visit you local court within 18 days upon receipt of the letter and apply to have it set aside.

This can be allowed if the said amount owed is in dispute, or the statutory demand does not comply with rules or simply was issued in error. This way, the statutory demand is reviewed and a bankruptcy petition is held at bay.

There are three general types of statutory demands and not all of these can be considered statutory demands for bankruptcy. The first is a statutory demand issued for a presently due debt, but on that is not subject court order.

The second type can be considered statutory demands for bankruptcy - these are demands issued for a presently due debt, which is subject to court order.

The last one is a statutory demand issued for a debt that is due some time in the future. But whichever type of statutory demand you receive, make sure to act on it.

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