Making someone bankrupt part 7

If the statutory demand route is followed then the demand has to be served "in the prescribed form requiring" the debtor "to pay the debt or to secure or compound for it to the satisfaction of the creditor". It also provides that the demand can only be relied upon if "at least three weeks have elapsed since the demand was served and the demand has been neither complied with nor set aside in accordance with the rules".

The form and content of the statutory demand is specified in the Insolvency Rules 1986 rule 6.1 and 6.2. The forms are prescribed. However, just because the correct form is not served, this does not mean that the demand will be set aside unless the demand served was likely to mislead. This is a matter that will be considered further when considering setting aside statutory demands.

The demand has to be dated and be signed by the by the creditor or a person stated to be authorised to make the demand on the creditor's behalf. It also has to specify whether it is made for a debt immediately payable or not so payable. It also must specify the amount of the debt and the consideration (in contract there is a distinction between enforceable promises for which either a promise to do something or payment or transfer of property is required, known as consideration, and those for which there is no such consideration which are thus regarded as gratuitous or unenforceable unless made by deed). If there is no consideration the demand must specify the way in which the debt arises. If the debt is founded on a judgment or order and is an immediately payable debt then it must give details of the same.

If the debt is not one immediately due, then the demand has to state the grounds on which it is alleged that the debtor appears to have no reasonable prospect of paying the debt. (In other words, why it can be said now that the debtor will have no real chance of paying the money when it falls due, obviously rather more difficult than showing that the debtor cannot pay a debt which is due now).

Various other charges which may have arisen such as interest previously been notified have to be identified together with the rate or basis as to how such amounts have accrued and the grounds on which it is said such payment is due. Such sums can only be claimed to the date of the demand.

There are specific provisions regarding creditors who have security. (Creditors effectively fall into two categories, secured and unsecured. The bank or building society which provided you with your mortgage, if you have one, is a party to which you owe a debt, but the mortgage is security and so providing the property is worth more than the debt then such creditor is fully secured. If in contrast you were in a position of "negative equity" then possibly a large part of the debt would be secured but not all of it.). If the creditor has security, then the creditor still puts the full amount of the debt in the statutory demand, but the creditor also has to specify the nature of the security and the value the creditor places upon it at the date of the demand. What then happens is that the amount claimed by the demand is the full debt less the amount specified as the value of the security.

The statutory demand also has to explain certain things which are necessary so as to enable the debtor to appreciate what it is that the debtor must do to avoid bankruptcy if he can. One of the things to be stated is the purpose of the demand and the fact that if it is not complied then bankruptcy proceedings may be commenced. Another matter to be specified is the time within which the demand must be complied with to avoid bankruptcy proceedings. Also to be specified are the methods of compliance open to the debtor, i.e. what it is the debtor has to do to avoid those consequences. It also has to state that the debtor has the right to apply to the court for the statutory demand to be set aside.

The demand must also specify one or more named individuals for the debtor to communicate with. The address and telephone number of such person has to be specified. These are persons for the debtor (if the debtor wishes) to communicate with to secure or compound for the debt to the creditor's satisfaction or to allow the debtor to communicate with them to establish to the creditor's satisfaction that there is a reasonable prospect that the debt will be paid when it falls due.