I have just received a statutory demand from citibank - ie, if we don't pay them £5k within 21 days they'll start bankruptcy proceedings. Obviously this was timed to arrive the day before the long bank holiday weekend, but luckily I'm a student, so can go straight to the county court on Wednesday morning and apply to have the demand set aside because the amount is in dispute. My question is this: should my letter in reply to the demand simply tell them that I'm applying for set-aside, or is it worth making an improved offer of settlement at the same time (though I can't afford anything like 5k!)? Any comments welcome...

-- Melody (mbc109@york.ac.uk), June 02, 2002

Answers

Do you mean reply to Citibank or reply to the court?

As far as I know you don't have to reply to any letter Citibank sent about this - your priority being to get your stuff in order to get it set aside on grounds of it being disputed. Obviously you do have to reply to the court but you are doing that on Wednesday in person.

It would make good sense to reply to Citibank politely - *after* you have got the county court to set it aside.

Absolutely do not make an improved offer if you are disputing it!

Good on you for being on top of it and having read the page on how to deal with it. And good on Carol Riley for discovering how to deal with this particular threat a year or more ago.

Lee

-- Lee (repossession@home-repo.org), June 02, 2002.

With regards to David's suggestion that you should go for bankruptcy...

I am not a financial advisor so I can only give you my opinion, not financial advice.

I think David may be steering you towards buying a service that he is involved in. Is that correct David?

His advice encourages you to pay to capitulate without contesting what the lender is trying to do.

He also suggests that bankruptcy is a relatively painless solution.

His advice is predicated on the idea that you do owe more than £750 - yet he does not know the circumstances of your case, so how can he make that assumption?

I think that if you were mis-sold a MIG, you may owe nothing at all. "Nothing at all" is less than £750.

If the lender did a really bad job of marketing your property, you may again owe nothing at all. "Nothing at all" is still less than £750.

In one post, David implies that if you contest the lender's action you may increase your costs and therefore the size of your debt and have it still end in bankruptcy. Yet at the same time he promoted bankruptcy as an option that limits the amount you will eventually have to pay whatever the actual debt load.

I find this element of his advice contradictory.

When I try to find my way through the contradictions, the answer they lead me to is that - depending on the amount you think you do actually owe - it may be in your interests to contest the statutory demand, possibly increasing your costs if you do, and only afterward opt for bankruptcy if your lender subsequently takes you to court for a hearing over the details of the shortfall and if it wins. I think it is unlikely to do that because you are a broke student but one can never rule out the possibility.

However, my point is that bankruptcy is open to you whichever option you take. In one option you may achieve more and actually avoid bankruptcy but can fall back on bankruptcy if necessary. In the other, you simply go bankrupt. I think one of these options is clearly more attractive than the other.

David points out that as a student bankruptcy will be less painful for you than for most, which I think is probably true.

However, it has much more impact on your credit record and - in some cases - job prospects - than losing a mortgage shortfall hearing.

Lee

-- Lee (repossession@home-repo.org), June 04, 2002.

One small obstacle you should be aware of.

A statutory demand is a demand before bankruptcy - bankruptcy can only be issued if the debt is over £750.

If you go before the court on WEdnesday or whatever, you are likely to be asked by the District Judge how much of the debt you are disputing. If for example, you dispute £3000 of it - that still leaves £2000, well above the level for which a Bankruptcy Petition can be issued for, so the DJ is unlikely to set it aside.

You say you are a student, if you have no tangible assets like a house, or other substantial property or savings, it might be in your interest to go bankrupt, effectively wiping this and other debt out.

Think about this before you act - if you are hell bent on applying for the set aside, be aware that the other side will want costs, and also that they may have evidence that they can put before the DJ to show you are properly indebted - then all you have done is add more costs and they will go ahead and issue the BP.

Other route is to try and secure for the debt (but this has to be to the other side's satisfaction). If all these avenues fail, you are looking at a BP issued within 21 days and served within the following 4 weeks or so and a Bankruptcy Order on the hearing unless you can persuade the DJ to agree to an IVA for which you will have to see an insolvency pratitioner.

Final route is to give your creditor an honest appraisal of your finances in the hope that they will see you are not fat enough to take their pound of flesh off, or to relent and just cut smallish lumps off monthly!!!!!

Good luck with it.

-- David Button (davidjohnbutton@supanet.com), June 02, 2002.

Thanks for these answers. Perhaps I should have been more clear. The total amount Citibank claim is £39k. I made an ex gratia offer of £800 - in other words, I dispute their figures, but would like to see an end to the matter. I have already provided full and truthful i&e info to them with that offer. Citibank responded with a demand for £5k within 21 days or else they'll bankrupt us. You're absolutely right that from our point of view bankruptcy isn't a big deal...we have nothing to lose! But it seems vindictive and counterproductive from Citibank's point of view - they're unlikely to make their money back over three years. For us it's an inconvenience we could do without.

-- Melody (mbc109@york.ac.uk), June 03, 2002.

Now you have given some more particulars, it does seem to me that Bankruptcy is the answer for you - can I refer you to another site which is www.debthelpuk.co.uk/ Have a look round that site, particularly at the forum which is for people just like you.

OK, when you are in the shite for nearly £40k, bankruptcy may not be such a big deal when you realise that most if not all that will be wiped after 3 years and you can then start again. If you have a job, or on Welfare, you still have to eat and live, and the Official Receiver seems to allow a decent standard including allowing people to retain cars and/or re-buy the equity in their homes.

Again, this may be a threat they will not carry out - but really, I think it best if they did bring an end to this for you.

-- David Button (davidjohnbutton@supanet.com), June 03, 2002.

Hi Melody,

Was the demand served on you personally ie. did someone hand it to you at the door, or was it sent in the post.

Also, is there a denial slip for you to complete within the demand.

-- Stephen (stephen.pooley@ntlworld.com), June 03, 2002.

It was sent in the post, and has no 'denial slip'. Why?

-- Melody (mbc109@york.ac.uk), June 04, 2002.

All the creditor has to do is show that you have in all probability received the demand - service through the post unless by recorded delivery is usually frowned upon by the court - but if you make an application to set it aside - you are effectively admitting you received it.

There is no denial slip as such attached to the demand - particulars as to how you can oppose or settle or secure for it are contained within the wording.

You could always sit back until you get the Bankruptcy petition which HAS to be served on you personally - if you then say, "never got a stat demand" and apply for the BP to be set aside, all you do is delay things and the court would likely put you to proof you did not get it rather than the creditor to prove you did.

Best advice is let them make you B - don't put obstacles in the way - go to the court with details of all your income and expenses and capital assets, sit in front of Judge, he will make the order, then you wait for the Official Receiver to contact you, interview over telephone usually, then you do as the OR tells you.

Lots of people have been through this, look at www.debthelp.co.uk

-- David Button (davidjohnbutton@supanet.com), June 04, 2002.

Many thanks for comments so far. This is the third time we've looked closely at bankruptcy over the 11 years since we started having problems with this mortgage. Both previous times we would have had to fund it ourselves, and we were talked out of it. So we already know in some detail the pros and cons. One thing that occurs to me - as the stat demand is just for 5k, does that mean the BP will also be just for 5k? If so, can I assume this means that my last letter in which I argued that only £5,250 of the 39k was at all defensible, has been tacitly accepted?

-- Melody (mbc109@york.ac.uk), June 04, 2002.

It is possible that they have limited the amount to £5000 as cases above this have to be heard in the high court - maybe they have decided tactically that demand of a smaller sum may jive you into action whereas from what you say, you are just as unable to pay £5k as £39k.

However, if they bankrupt you for £5k, they are effectively estopped from putting in a demand for a higher figure out of the bankruptcy shareout if there is one!

-- David Button (davidjohnbutton@supanet.com), June 04, 2002.

Melody and David,

I,m just trying to establish if what they have sent you Melody is what they say it is ie. a proper Statutory Demand.

It seems to me from my research that they must use a prescribed form to make the demand, and it must be served on the debtor in person. The form may contain a denial slip (although this may only apply to Scotland - I,m trying to establish this one). There's a fair amount of info on this at insolvency.gov.uk plus on other solicitors web- sites confirming this - can they be wrong?

-- Stephen (stephen.pooley@ntlworld.com), June 04, 2002.

A few little notes for Lee:-

1. I am not involved in Bankruptcy Law either as a practitioner or solicitor. I have no vested interest in the advice I gave.

2. I knew the amount involved was for more than £750 because quite simply you cannot make a person bankrupt for less, and hence the Stat Demand has to be for £750 or more - simple!!!!!!

3. Not knowing the full facts ouright made it difficult to give advice - so what I did was suggest scenarios and the recipient of the advice can match the best scenario to his/her circumstance. As it was Melody did write in further and say the amount was well over £750 - see further postings.

4. My advice was not contradictory, but based on "do this if in boat 1, do this if in boat 2" etc.

5. Lee, try not to be critical of people who are trying to help!!!!!

-- David Button (davidjohnbutton@supanet.com), July 04, 2002.

In England there is no denial slip.

If Citibank were serious about bankruptcy they would have had the Stat Demand served personally by a process server. However some County Court Judges do accept that a statutory Demand has been served when it has been posted.... (which in my opinion does not constitute good and proper service) at least if a demand is sent by recorded delivery there is a signature of the person receiving it....(not allways the correct person but a signature never the less). Bankruptcy Petitions should/must be served personally ie delivered by hand ..... if you avoid service of it they can allways advertise it in the press which is also classed as good service.

-- why? (locate1st@hotmail.com), July 12, 2002.