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From the date you receive the statutory demand you have 21 days to respond to it by:
a. Paying the debt;
b. Reaching some resolution with the creditor; or
c. Bringing an application to set aside the statutory demand.
Preliminary steps:
1. You should firstly confirm the date the statutory demand was received and determine how long you have to act. To be on the safe side assume you have 21 days from when the covering letter or the statutory demand itself is dated.

2. Seek legal advice immediately. The time frame is strict and there are no extensions or exceptions for set aside applications filed outside the 21 days.

If you dispute the debt:
1. Where the statutory demand relies on an affidavit:
a. Offer to the settle the matter by paying what you agree that you owe;
b. file an application to set aside the statutory demand in its entirety; or
c. pay the amount you agree that you owe to the creditor and bring an application to set aside the statutory demand on the basis the disputed balance.

2. Where the statutory demand relies on default judgment – you will need to instruct a solicitor to bring an application to set aside the default judgment. You will need to explain why you failed to file a defence with the requisite time frame and have a defence prepared. You will need to make an application to set aside the statutory demand at the same time. Depending on the amount of the debt it may be more commercial to simply pay it rather than go to the expense of this process.

If you agree that you owe the debt:
Where the statutory demand relies on:
a. an affidavit – negotiate a payment arrangement.

b. A default judgment –negotiate a payment arrangement or apply to the court that issued the judgment for an installment order.
If you fail to respond within the 21 days:
You will be presumed to be insolvent. The creditor will have a three (3) month window from the expiry of the statutory demand to file a winding up application relying on the presumption of insolvency. You will not be able dispute the debt without leave of the Court. At this point your options are limited. You will either need to:

c. pay the debt in full;

d. negotiate a payment arrangement (note you will have less leverage in negotiations at this stage than you would have prior to the statutory demand expiring);

e. put the creditor on notice of your dispute providing full details and advise you will seek leave to raise rely on the dispute should a winding up application be filed. More importantly at this stage you must be prepared to provide up to date and detailed evidence of solvency in order to try and dissuade the creditor from filing a winding up application. The best option in terms of evidence of solvency is to obtain a solvency report from an insolvency practitioner. This is a costly exercise.

If you are served with a statutory demand, take it seriously and do not take any chances.

Contact us immediately to seek advice.

Luke Gunthorpe 07 3152 4403