Having debt is normal in the UAE. There are times that you really can’t avoid borrowing money from banks, people, or other financial institutions. But of course, you have to be a responsible payer as well. It won’t work if you will get a loan and leave the country without paying.
Related to this point is the UAE insolvency law that is now in full effect since January 2020. This law has a goal to protect debtors in all emirates in the UAE in case there will be a legal prosecution related to financial debt.
Also, with the new insolvency law, debtors will not be tagged as criminals if they fail to pay their loans. Instead, it gives them a three-year time to pay the amount due. Continue reading the rest of the article to learn more.
What is the Insolvency Law in the UAE?
The description of insolvency law is written in Article 8 of the Insolvency Law Dubai. It is specific to cases of individual debtors who don’t have the capacity to meet their financial difficulties. The law covers those who can’t repay their debts including the loans from credit cards.
Is Insolvency Law different from Bankruptcy Law?
Some expats use insolvency law and bankruptcy law interchangeably. If you are confused between the two, here’s the answer to your question: Yes, the current bankruptcy law in the UAE covers companies and businesses in the country. The insolvency law covers individual debtors only.
What are the benefits of insolvency law to individual debtors?
The insolvency law is implemented to help individual debtors at large. The government of the UAE understands that there are things that will hinder you from paying your obligations in a timely manner, especially if you are just an employee in the country earning the minimum salary.
Before the new law has been put into effect, debtors were receiving disciplinary measures if they couldn’t afford to pay their existing loans. This included imprisonment and travel ban. The new law is proven to be more lenient so that those who default to pay their loans can get a chance to manage their finances without pressure.
If you are looking for the benefits of insolvency law, here are some of what’s written in the law to help you with debt relief.
- It will give you legal support in case you have existing loans and you foresee that you will struggle from your debts in the coming months.
- It will help you settle your loans within a span of three years with the help of professionals who will guide you to pay off your debts.
- It will protect you from legal prosecution by giving the court evidence that you can be productive. If you are the breadwinner in your family, this will also help you provide for them.
- It will prevent you from applying for new loans unless the court gives you permission to do so.
These are actually the new amendments to the insolvency law. Now that there have been changes, individual debtors don’t have to be scared of being imprisoned for not being able to pay their credit card loans and other loans in the UAE. Although the UAE government supports small debtors, this doesn’t mean that you have to be an irresponsible payer. You still need to face your responsibilities. The insolvency law will only give you enough time to recover from your difficulties but you are not really saved from paying the money you used previously. You are still required to pay but in the span of three long years regardless of the amount of your loans.
How can you use the insolvency law for debt relief in the UAE?
If you are currently experiencing financial struggles, you can use the benefits of insolvency law in the country by doing the following steps.
File a case for insolvency.
This is needed so that the government and the court would know that you are under financial struggles. You will need to register a case in the court.
Secure the documents needed.
After filing a case, the next process would be securing the documents needed. Here’s what you need to submit:
- A report to summarize your financial position. This should include all income coming from internal and external sources. It should also state your professional status, source of income for the past 12 months, and liquidity projections.
- A statement of your property within and outside the UAE. This should include all movable and immovable assets and their estimated values.
- A list of your creditors which should include their names, addresses, amount of loans, the maturity date of the loans, and the collateral used for the debts.
- A statement declaring that you are facing financial difficulties and it is hindering you from paying your loans timely and in the future.
- A statement declaring any applicable legal proceedings against you.
- Your debt settlement proposal.
- The amount of money that can help support you, your family, and your dependents.
- A disclosure that can trace outside transfers in the past 12 months.
- The name of the professional who will assist you with debt relief.
- Any document related to support your insolvency application.
Pay the applicable fees.
The fees that you have to pay will be for the professional or legal expert who will help you with the debt relief and for the judicial proceedings. If you can’t pay at the moment, the court will allow delayed payments.
Final Thoughts
The application doesn’t always guarantee approval. After you do the steps above, the court will proceed with the required steps and if they see that your application is fit, they will preserve your funds and will allow an expert or a group to assist with the settlement. Note that the court is the one who decides to approve or reject your application. In the case that you don’t qualify for it, you can file an appeal so that the Court of Appeal will handle the case for you.
There’s a legal process and you need to comply with it before you can enjoy the benefits of the new insolvency law in the UAE. If you know someone who is currently facing the same financial struggles as you, don’t hesitate to share this information with them. Sharing will help you save a co-expat!