Statutory Demands and the EJO Office
If a creditor wishes to make you bankrupt, they usually begin the process by issuing you a statutory demand. A statutory demand is a written formal demand for payment of a debt of at least £5,000
Receiving a statutory demand means that if you don’t settle the debt or come to an arrangement with the creditor, they could then begin court proceedings to make you bankrupt. It is very important that you don’t ignore a statutory demand.
If you do not repay the debt in full or come to an arrangement with the creditor that they are happy with within 21 days of the demand being served on you, your creditor can apply to make you bankrupt.
You also have 21 days to reply to the court regarding the statutory demand, to ask for it to be cancelled or set aside.
Do not ignore a statutory demand if you do not want to become bankrupt. If a creditor has one in place against you, they can then immediately apply to the court to make you bankrupt if they wish.
Your options to deal with a statutory demand are:
- Apply to have it cancelled
- Clear the debt in full
- Offer to repay in instalments
- Explore further credit
- Reduce the debt to below £5,000
- Proceed to bankruptcy
We recommend seeking independent advice no matter which one of these options you decide to proceed with. You can contact us for free and in confidence on 800 028 1881
If there remains a dispute between you and the creditor regarding the debt, then you can apply to the court to set aside the statutory demand. Once you have applied to do this the 18-day time limit for dealing with the demand stops until the court has decided whether to grant your application.
To set aside the demand you must do the following within 18 days of it being served on you.
If you miss the 18-day time limit, it is still possible to apply to set aside the statutory demand. You will need to provide sufficient reasons for your delay and the court may still not accept your application.
The court can dismiss the application without a hearing if you do not detail sufficient information or reason to have the demand set aside. If the court approves your application, you will be forwarded notice of a date and time for a court hearing, giving at least seven days’ notice to you and the creditor.
Valid grounds to set aside the statutory demand are:
- You have a separate claim against the creditor which is equal to or more than the debt being pursued in the statutory demand
- The debt the creditor is pursuing you for is already secured against a property that is worth the same or more than the debt
- The total unsecured debt in the statutory demand totals below £5,000
- The debt is disputed, and there are reasonable grounds for dispute.
- You can apply to the court for a time order if the debt is regulated by the Consumer Credit Act 1974 – giving you more time to repay the debt.
- The court is satisfied on some other grounds that the demand ought to be set aside.
If your application to the court to set aside the statutory demand is unsuccessful, the creditor may apply to make you bankrupt if the debt owed is above £5,000. They can do this any time after 21 days have passed since the statutory demand was served on you.
If you have missed an opportunity to set aside your statutory demand, you can still contact the creditor in an attempt to come to an agreement to settle the debt. However, if this proves unsuccessful, you may eventually be served notice of a bankruptcy hearing date. This hearing may still give you the chance to stop the bankruptcy going ahead.
You will need to send a notice to the court before your hearing if you wish to oppose the bankruptcy petition.
You will need to show in your notice that you have grounds to defend the bankruptcy. Such grounds include:
- You have access to funds and will settle the debt due to the creditor immediately
- You have made a reasonable repayment offer that the creditor has refused
- You have a court judgment for the debt which is payable by instalments and you have not missed any payments
- The amount of the debt stated on the statutory demand was too high and you paid the actual amount you owed within 21 days of the demand being served on you
Before you are made bankrupt, you will be served notice of your bankruptcy hearing in front of a judge, who decides if it is appropriate to make the bankruptcy order based on the evidence presented by both you and the creditor.
The judge may adjourn the bankruptcy hearing until you have sought the appropriate advice on bankruptcy and the implications it will have for you
If a creditor makes a claim through the courts to recover a debt, a court judgement may be made detailing that the debt is legally owed. If this debt is subsequently not paid, the creditor has the right to instruct the Enforcement of Judgements Office, known as the EJO, to enforce this court order.
The EJO is responsible for enforcing the debt judgements made by the Small Claims Court, County Court and High Court in Northern Ireland.
The EJO office will take steps to assess your means to establish the most appropriate way to settle any debt that has been passed to them to enforce. They will act fairly to ensure their actions to recover the debt are neither harmful nor will cause hardship. They will always assess each case on its own merits and take your individual circumstances into account before deciding on the most appropriate method to enforce the debt.
You should always co-operate with the EJO office as failure to do so can escalate the situation and, at a progressed stage, may lead to a warrant for your arrest being issued to have you escorted to a means assessment interview. If you are worried as you have received paperwork from the EJO office or are anxious about dealing with the EJO you should contact us for advice.
The EJO will require you to attend a meeting to enable them to assess your current financial situation and then determine what options you may have to repay the debt owed.
You should bring documents to the meeting to help prove your current financial situation, a debt adviser can give you a list of what you should bring with you.
You should always co-operate with the EJO office and are advised to go to the meeting as arranged. You can change the date and time to make it more suitable for you and should contact the EJO to do this.
After assessing your financial circumstances, the EJO will determine which option(s) available to them to enforce the judgement is/are the most appropriate. The EJO will apply any one, or more, of the following options:
Attachment of Earnings Order (AEO): the EJO can order your employer to deduct funds directly from your wages to repay your debt. Your employer must co-operate with the EJO or face a penalty. An AEO cannot be enforced if you don’t receive a PAYE salary.
Instalment Order: If the EJO is unable to enforce an Attachment of Earnings Order (AEO), for example, if you are self-employed, then the EJO may apply an instalment order. They will determine how much you should repay towards the debt each month, after taking into account your essential outgoings and living costs. You pay the creditor directly, and if you miss a payment the creditor will inform the EJO. The EJO may then apply for committal proceedings against you and you must attend a hearing before a judge to explain your reasons for not maintaining the payments on your instalment order. While extremely rare, it is possible that wilful, continued non-compliance with an enforcement order could lead to a short custodial sentence.
Order Charging Land: The EJO places a secured charge over your land or property. Applying this order does not give the creditor any powers to force you to sell your property or land. However, if you voluntarily decide to sell your property while the order is in place, any funds realised will be used to settle your secured creditors as a priority before any funds are paid to you. Once the Order Charging Land is made, it will be in place for 12 years and it is the only EJO enforcement order that carries interest charges, at 8% per annum. If you do not sell your property or are unable to repay the secured charge within the 12-year period, the secured charge will then drop off and not be secured against your property any longer.
Seizure Order: The EJO has the power to seize goods to repay the debts and any enforcement costs incurred. Only items that belong to you solely can be seized, and some goods are exempt. Seizure Orders are normally used for business or trade debts.
Order Appointing Receiver: The EJO can use this order when they are aware that you may be due to receive money from a third-party source, for example, a sale of an asset or inheritance. The EJO can make the order to appoint a receiver and the third party must pay these monies directly to the EJO. You do not receive any notice regarding this order, therefore you may not be aware until you expect to receive the funds and they do not materialise.
Garnishee Order: This gives the EJO the power to freeze your bank account and give any available funds directly to your creditor. The account must be in your sole name and in credit. The EJO contact your bank directly with this order and the bank then freezes your account. While your bank account is frozen you will be unable to withdraw, make payments or pay monies into it. The EJO office will then set a hearing where it will be decided whether these funds will be returned to you, partially returned or all monies paid directly to the creditor.
Certificate of Unenforceability: If the EJO are satisfied you can’t repay your debts within a reasonable period and have nothing that could be sold to help settle your debts, then they can decide not to enforce an order. This will usually be done if you have a low income, no property and very little assets. This certificate does not write off the debt but will mean no further action will be taken. The certificate will be added to the EJO debt register and this can affect your credit rating. When a certificate of unenforceability is in place the EJO will not accept any further applications for enforcement unless your circumstances change.
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