Why Draft Winding Up Petitions Get Debts Paid Faster Than Statutory Demands
Draft winding up petitions result in payment of 4 out of 5 debts, so why wait on a statutory demand? Statutory demands, or stat demands, are usually the first stage of an insolvency process. It is a formal request for payment of an overdue debt and can be used against a company or an individual. The creditor serves it on the debtor, and sits back to wait for the money to come in.
‘Wait’ being the operative word here as the demand allows a full 21 days from the date of service for the debtor to pay up – and that’s assuming they are both willing and able to pay. As such a stat demand is not always the quickest solution to payment problems and getting your debts paid – there’s just not enough urgency behind it to grind the debtor into paying up quickly. Get Lovetts 10 free tips for effective debt collection here and drastically improve your credit control procedures.
While in some cases, stat demands are the best option – for example, they are required for insolvency of individuals, in most cases, it’s fair to say that a stat demand simply gives the debtor too much time. You have already waited beyond your payment terms for money due, chased, chased again, and again to no avail. Why offer a further 21 days on top of your usual payment terms – terms they have already blatantly flouted – when you could demand payment within 7 days and then take them to court if they still don’t pay?
If the debtor has already used up the time allowed in your payments terms, showing no intention of paying or disputing the payment owed, a draft winding up petition against a company is usually the more effective solution for finally getting the outstanding invoice paid.
Draft winding up petitions can give the debtor 7 days to pay. Added to this, it comes with a warning that if no payment is made, the petition will be presented to court as a request to dissolve the company which is clearly unable to pay its debts, in order for the creditor to recover the debt.
At Lovetts, we have found that when we issue draft winding up petitions on behalf of our clients to their debtor (not yet presented to court) – they have a remarkable success rate, prompting payment in 81% of cases.
If a statutory demand has been issued and the debtor company does not respond within the 21 days, the next stage is usually a winding up order – this effectively means the debtor has an extra two or three weeks to hold on to your cash. However, you can speed up the process by using a draft winding up petition, and as stated above, a draft winding up petition prompts immediate payment in 4 out of 5 cases.
- Statutory demands are required to make individuals bankrupt but are not necessary for winding up a company
- Stat demands can be used against a company as the first stage of insolvency, but a draft winding up petition is more effective and speeds up the process of securing payment
- A company is deemed insolvent if it does not pay its debts on demand. Therefore, a draft winding up petition giving 7 days to make payment is sufficient
- 81% of draft winding up petitions result in payment
Winding up petitions are all-too-often overlooked by businesses as an effective way to chase up and secure overdue payments from debtors. We have found that draft winding up petitions have an impressive 81% success rate in commercial debt recovery, usually due to the simple fact that it shows you are serious about recovering the money owed to you read more
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