Lately the recession has brought a lot of people under the prying eyes of the creditors. Do not be astonished if someone receives a statutory demand from a creditor. Most if the creditors will think twice before taking a big risk.
What is Statutory Demand?
Statutory demands are like a ‘warning sign’ for the debtors who owe a huge debt to the creditors. The debtor receives a 21 days notice from the creditor to pay of his debt in full, failing which the court can start bankruptcy procedures against him.
Statutory demands are treated as a precursor to bankruptcy petition. Sometimes it works wonders for the creditors as most of the debtors tries to avoid a bankruptcy proceeding.
This does not throw you in a dead-end. You can take your chances and start bargaining with your creditors. If you are unable to pay within the stipulated 21 days, request your creditor for an instalment payment option. In most cases the creditors agree to an instalment payment as it will also relieve him from the hassles of petitioning for bankruptcy.
The Statutory Demand Procedure
A statutory demand is signed by the creditor or the person who is acting on behalf of the creditor. The demand will state complete details of your debt like:
- Total amount of debt
- Reason for sending the statutory demand
- The date within which you have to pay
While the creditor sends the demand, he levies interest on the debt. Thus you may find the amount higher than you have expected. The interested gets levied till the date of issuing of the demand after which it freezes.
Debtors who acquired secured loans against their property are sometimes asked to pay back by selling off the collateral. Then again, if a secured debt enters a bankruptcy process the collateral will get sold eventually. Thus at times debtors find it easier to pay back their debts on a statutory demand rather than on a bankruptcy.
It is the responsibility of the creditor to ensure if a debtor has received the statutory demand or not. This implies that the creditor will personally visit the debtor to deliver the demand or he will send it via first class post that will be duly acknowledged by the debtor on receiving. The creditor has to prove that the debtor has received the statutory demand.
Statutory Demand Compliance
Once you have received a statutory demand you have to comply with it. You cannot ignore the demand or leave your home just to avoid paying, because the demand will be advertised in the local as well as the national newspaper. Hence you will be legally bound to comply with the demand from the date of advertisement.
You may object to it in writing along with a signed affidavit, stating the reasons of disagreement. However the court may dismiss the demand of the creditor if you can support your objection with valid evidences. If you fail to provide any evidence to prove that you don’t owe any money to the creditor, the court will start the bankruptcy proceedings henceforth.
The Loopholes of Statutory Demand
The domino effect – Practically, not many creditors issue a statutory demand because it may have a negative impact on their. The news of the issuance of a statutory demand may spread around and thus the creditor may lose many prospective customers.
A statutory demand must show the name of the creditors or people acting on their behalf. Otherwise it will not be valid. If the debtor is unable to reach the creditor then it will be considered invalid.
It is very important to note the time and name of the person you wanted to speak to and the person you actually talked to. You must also try to note the conversation.
been following these blogs here for a month now. found new blogs on a regula basis – informative and lucidly explained.
howevr, i was disaapointed that they somehow stopped last week, thought the site was going down.
now that it has restarted, hope that it continues. kudos to the team