New Insolvency Law in the UAE

To maintain a healthy banking environment in a country, guidelines around debt resolution and insolvency are very crucial. If you are one struggling with debts or personal loan in the UAE or just want to boost your economic and legal knowledge, this article is for you! Let’s clear your doubts on new insolvency law in the UAE and how it impacts us as the citizens of the country. 

New Insolvency Law: How does it Work?

Approximately 90% of the UAE’s population comprises of expats. A lack of insolvency guidelines might force expat borrowers to take the help of unfair practices like relying on credit cards to repay existing personal loans and debts or borrowing from moneylenders and the worst of all fleeing the country, leaving behind a debt trail. 

The UAE cabinet has recently approved a law to regulate insolvency cases. The law addresses the loan holder’s inability to pay the debts (personal loan, car loan, education loan) due to bankruptcy and protects them from facing the threat of legal prosecution or imprisonment. With the insolvency law, borrowers can continue their employment, working with a legally appointed financial expert to work out an effective repayment plan, which will clear all the debts in three years. 

If the borrower is facing financial difficulties that prevent him/her from paying all their debts, they can apply along with an order from the court. The court appoints one or multiple experts to assist the debtor during the proceedings. A financial plan is designed by the experts considering multiple factors to settle the financial obligations, which are later followed by the execution of the plan directly by the debtor with assistance from the expert.

Both borrowers and lenders are benefited from the law as it will help struggling borrowers to declare insolvency and work under the country’s legal system for settling their debts (personal loans, car loans, etc.) and simultaneously ensuring that lender’s right is also protected. 

What Documents will You Need for Filing a Request?

The debtor needs to provide the following documents when applying for obligation settlement.

1. A memo containing a description of financial position along with data related to sources of income
2. Details of creditors and debts
3. Statement of debtors’ assets (movable, immovable)
4. Statement of legal proceedings against the debtor if any
5. A statement disclosing financial transfers outside the country.
6. Proposal to settle financial obligations 

To Conclude!

The new insolvency law in the country provides debtors, a legal recourse of managing their financial obligations. With the help of an effective repayment plan, you can repay your debts, however, your credit report will reflect that you’ve struggled with debts in the past, which can lead to lower chances of qualifying for credit cards and loans.

If you are struggling with repayments (personal loan, car loan, etc.) you can opt for the debt resolution plan and pay your debts without any trouble. As the old saying goes prevention is better than cure, it’s always better to cut down on borrowing to avoid any hassle with repayment.