NewsThere have been significant changes in the past couple of years with regards to creditors using the insolvency route as a way to recover debts. The most important change was the increase of the bankruptcy threshold from just £750 to a much more realistic £5,000. A less obvious but no less important change has been with regards to regulation. In the past, a number of debt purchasers routinely used statutory demands as a debt collection tool, some event went all the way to the bankruptcy petition. Ever since the FCA took over consumer credit regulation in April 2014, the number of statutory demands issued by debt purchasers for consumer credit debts has reduced dramatically.
Capquest, Cabot, First Credit, Aktiv Kapital (now PRA Group) and Lowell were some of the worst culprits. Lowell were probably the most aggressive, often making people bankrupt for no more than £1,000.UpdateFrom October 2015, a creditor can only apply to make you bankrupt if you owe them more than £5,000. In theory, two or more creditors who are owed at least this amount between them can petition together. In reality this hardly ever happens.
The following forms are used:
form 6.1 is used for debts not subject to judgment;
- form 6.2 is used for judgment debts or court orders.
In many cases, the creditor may not have any intention to proceed with a petition. The fees payable are high and you may have a lot more debt and not enough assets to pay it all off so your creditor could well be out of pocket if they decided to proceed, however, it should never be assumed that they are using the statutory demand just as a debt collection tool.
You can apply for set aside if:
How to apply
You need to download and fill in the following forms and take the completed forms plus three copies to the court in person or by registered post:
The forms should go to the court named on the statutory demand. No fee is payable. The court can dismiss the application without a hearing if they think there are no grounds to make it, otherwise a hearing will be arranged with a district judge.
There have been a lot of arguments surrounding service of statutory demands, particularly when they were commonly used by debt purchasers. It has always been a common belief that they should be served personally by a process server, however, substituted service may be acceptable.
In many cases, improper service of statutory demands (i.e. sending them via normal post or pushing them through the letterbox) has been regarded as an indication that the creditor is not serious about filing a petition and is just using them as a debt collection tool. That may well be true in many cases, however, you should never be complacent and ignore a statutory demand.
CPR 13.2 deals with service:
Rule 13.2.3 and 13.2.4 set out in great detail the process for substitute service when the statutory demand is not served personally.
In the past, some creditors issued statutory demands that were pre-dated by as long as three weeks, making it look like the debtor had already missed their opportunity to apply for set aside, despite the fact that these had been served personally. It should be easy enough to establish that the demand had not been served two or three weeks earlier as there would be a record of service if it was effected by a process server.
You may need to argue about service if you have missed the deadline to apply for set aside. There may be other reasons why you may need to apply later than 18 days from the date of service of the demand, for example if you were away from home, working abroad, on holiday, in hospital, etc. You may also want to apply for an injunction to avoid a petition being filed.
Rule 13.3.5 sets out the process:
The creditor has to file the following: