Statutory Demands: A Practical Guide to Recovering Unpaid Debts

One option is a statutory demand.

A statutory demand is a formal demand for payment. For the right debt, it can be an effective way of encouraging a person or business to deal with money they owe.

However, a statutory demand is a serious step. It isn’t appropriate for every unpaid invoice, particularly where there is a genuine disagreement about whether the money is owed.

This guide explains what a statutory demand is, when you can use one, how much you need to be owed, what happens during the 21-day period and what your options are if the debt remains unpaid.

If you’re considering sending a statutory demand, Johnson May Solicitors can review the debt and help you decide whether it is the most effective and cost-conscious way forward.

What is a statutory demand?

A statutory demand is a formal written demand asking someone who owes you money to deal with the debt.

It usually gives them 21 days to:

• pay what they owe;
• provide acceptable security for the debt; or
• reach a satisfactory agreement with you.

You don’t necessarily need to take the debtor to court and obtain a judgment before sending a statutory demand.

However, it is important to understand that a statutory demand isn’t simply a stronger debt collection letter.

If it isn’t dealt with, it may allow the creditor to consider taking further action which could ultimately lead to bankruptcy for an individual or the winding up of a company.

That is why it can be effective — and why you should check that it is appropriate before sending one.

What do “creditor” and “debtor” mean?

You’ll see two words used regularly when reading about statutory demands.

A creditor is the person or business that is owed money.

A debtor is the person or business that owes the money.

For example, if your business has provided services to a client, sent an invoice and hasn’t been paid, your business is the creditor and your client is the debtor.

We’ll use those terms throughout this guide to keep things simple.

When can you send a statutory demand?

A statutory demand may be worth considering when you have a clear, undisputed debt that is already due for payment.

A typical situation might look like this.

You have provided goods or services to a client. You sent your invoice. The payment date passed several weeks ago.

Your accounts or credit control team has chased the client repeatedly. Perhaps you’ve been told that payment is being processed or will be included in the next payment run.

But nothing arrives.

The client hasn’t raised a genuine complaint about the goods or services and hasn’t given you a proper reason why the invoice isn’t payable.

At this point, you may want to consider whether a statutory demand is an appropriate next step.

Before sending one, you should normally be satisfied that the debt is due, the amount can be clearly identified and there isn’t a genuine disagreement or claim by the debtor which affects what is owed.

How much must you be owed to send a statutory demand?

Different rules apply depending on whether the money is owed by an individual or a company.

If an individual owes you money

You must generally be owed at least £5,000 before an unpaid statutory demand can be relied upon as part of taking the next step towards bankruptcy.

If a company owes you money

The debt must generally be more than £750 before an unpaid statutory demand can be relied upon as part of taking the next step towards winding up the company.

These figures are correct as at 15 September 2026, when this guide was prepared.

Financial limits, deadlines and procedures can change. You should therefore check the current requirements before taking action. If you’re unsure, we can check the position for you.

Do you need a court judgment before sending a statutory demand?

Not necessarily.

For an appropriate, undisputed debt, you may be able to send a statutory demand without first taking the debtor to court and obtaining a judgment.

For businesses that have already spent considerable time chasing an unpaid invoice, that can make a statutory demand worth considering.

But the fact that you can send one doesn’t necessarily mean that you should.

The circumstances surrounding the debt need to be considered first.

When should you NOT send a statutory demand?

This is particularly important.

A statutory demand should not normally be used where there is a genuine disagreement about whether the money is owed.

For example, the debtor may say:

• the goods or services weren’t supplied as agreed;
• the work was defective;
• the invoice is incorrect;
• some or all of the invoice has already been paid;
• payment isn’t due yet; or
• they have a genuine claim against you which affects the amount they owe.

You might strongly disagree with them.

But if there is a genuine disagreement that needs to be resolved, a statutory demand may not be the appropriate way to recover the money.

The same applies where you aren’t sure exactly how much is due or where you have no intention of considering further action if the demand is ignored.

Simply saying “we dispute the invoice” doesn’t necessarily create a genuine dispute either.

If you aren’t sure, this is a sensible point to get advice. We can review the contract, invoices and correspondence and help you understand whether a statutory demand is appropriate or whether another debt recovery route would be better.

What happens after a statutory demand is sent?

The debtor generally has 21 days after receiving the statutory demand to deal with the debt.

They might:

• pay in full;
• provide acceptable security;
• propose a payment plan;
• offer a settlement;
• challenge the debt; or
• do nothing.

The relatively short timetable can be one of the advantages of a statutory demand.

But it is important to understand that the money doesn’t automatically become yours when the 21 days expire.

If the debt remains unpaid, you then need to decide whether taking further action is appropriate and commercially worthwhile.

Can a statutory demand be disputed?

Yes.

If an individual receives a statutory demand and believes there are proper grounds for challenging it, they will normally need to apply to have it set aside within 18 days of receiving it.

A company is dealt with differently and doesn’t use the same set-aside procedure.

A company may ask the creditor to withdraw the demand and, if necessary, may ask the court to prevent the creditor from taking the next step towards winding up the company.

This is one reason creditors should make sure a statutory demand is appropriate before sending it.

What are the advantages of using a statutory demand?

For the right debt, a statutory demand can be a useful debt recovery tool.

It may encourage a customer who has repeatedly ignored ordinary payment reminders to take the debt seriously and engage with you.

It may result in full payment, a settlement, security or an agreed payment arrangement.

You also don’t necessarily need to obtain a court judgment first, and the debtor generally has a relatively short period of 21 days in which to deal with the debt.

For a business whose credit control team has already exhausted the usual chasing process, those can be significant advantages.

What are the risks?

A statutory demand doesn’t guarantee that you’ll get paid.

One of the biggest risks is using one where there is a genuine disagreement about the debt. The debtor may challenge your action, potentially resulting in additional costs and delay.

There is also a practical question to consider:

Does the debtor actually have the money or assets to pay you?

If the debtor is genuinely in serious financial difficulty, taking further action may not result in you recovering everything you’re owed.

And if formal insolvency eventually follows, being the creditor who started the process doesn’t normally put you ahead of everyone else waiting to be paid. Your original advice identifies this, together with the potential further expense and commercial consequences of proceeding.

Before escalating an unpaid debt, it is therefore worth considering three questions:

How likely are we to recover the money? What will the next step cost? Is it commercially worthwhile?

Will sending a statutory demand damage the client relationship?

It can.

This is an important commercial consideration, particularly where the debtor has previously been a good customer.

Perhaps they have always paid on time before and are experiencing a temporary cash-flow problem. You may want to preserve the relationship while still making it clear that the outstanding invoice needs to be dealt with.

Alternatively, repeated broken promises and continued non-payment may mean that recovering the debt is now your priority.

There isn’t one answer that applies to every situation.

The important thing is to make sure your debt recovery strategy supports your commercial objectives, rather than taking action simply because you can.

Can you negotiate after sending a statutory demand?

Yes.

Sending a statutory demand doesn’t prevent you and the debtor from reaching an agreement.

You might agree payment in full, instalments, a reduced settlement, security for the debt or another commercial arrangement.

If you reach an agreement, put it in writing.

It should be clear what has been agreed and what will happen to the statutory demand.

Importantly, don’t assume that discussing a possible settlement automatically stops the original deadline.

What happens if a statutory demand isn’t paid after 21 days?

If the statutory demand hasn’t been paid, secured or satisfactorily resolved after 21 days, the creditor may consider taking the next step.

Where the debtor is an individual and the relevant requirements are met, that may mean considering a bankruptcy petition.

Where the debtor is a company, it may mean considering a winding-up petition.

Neither happens automatically.

They are separate court processes and involve additional costs and considerations.

Before going further, it makes sense to reassess the situation.

Is the debt still undisputed? Is the debtor likely to be able to pay? Is further action likely to result in a worthwhile recovery? And does the likely outcome justify the additional cost?

The objective should be recovering your money, rather than taking legal action for the sake of it.

I’ve received a statutory demand — what should I do?

Don’t ignore it.

If you or your business has received a statutory demand, the deadlines can be short.

Keep the demand and make a note of exactly when and how you received it. Then gather the relevant contract, invoices, statements, emails and other correspondence.

Check:

• whether you owe the money;
• whether the amount is correct;
• whether payment is actually due;
• whether you have a genuine disagreement about the debt; and
• whether you have a claim against the creditor that affects what you owe.

An individual who wants to challenge a statutory demand will normally need to take action within 18 days of receiving it. Companies are dealt with differently, and urgent advice may be necessary.

Ignoring a statutory demand won’t make it disappear and could allow the creditor to take the next step.

Is a statutory demand the right way to recover your unpaid invoice?

If you have a clear, undisputed and overdue debt and ordinary credit control hasn’t worked, a statutory demand may be worth considering.

But it isn’t automatically the best option.

At Johnson May Solicitors, we can review what you’re owed, what the debtor has said, what you’ve already tried and what you want to achieve.

We can then help you decide whether sending a statutory demand makes commercial sense or whether another debt recovery option is likely to produce a better result.

You don’t need to work out the process before speaking to us.

Tell us about the unpaid invoice and we’ll help you understand your options.

Call Johnson May Solicitors on 020 8150 7173 or make a free online enquiry.

This guide provides general information about statutory demands in England and Wales and isn’t a substitute for advice about your particular circumstances. Rules, financial limits and procedures can change.