Can you file for bankruptcy in the UAE?

Dubai: The issue of bankruptcy and personal insolvency protection laws have become a hot topic in the UAE, due to the current economic situation, which is forcing many to seek personal loans to manage their lives amid fear of a job loss.

What legal protection does an individual have, when he loses his job with huge amounts that are due to banks and financial institutions?

In the 1990s, a number of expatriate businessmen fled the country, leaving lots of debts and cheques to be bounced later, as legal protection is not available.

Gulf News spoke to a legal consultant to get an idea of the issue and the options available for people to exercise, should they need protection amid rising debts.

Lawyer Mohammad Al Suwaidi, of Al Suwaidi and Co Advocates and Legal Consultants responds to Gulf News queries, as follows:

Gulf News: If a worker loses his/her job and has outstanding loans or post-dated cheques that can't be paid, would he/she face a jail term?

Mohammad Al Suwaidi: Jail term is always a possibility but it is up to the judge's discretion whether to punish the suspect with a jail term or a fine according to his/her criminal intention and after considering the circumstances of the case.

How long is the jail term?

It is considered a misdemeanour, the maximum of which goes up to three years.

Can the person file for bankruptcy and stay out of jail?

An expatriate cannot file for bankruptcy, unlike the United States; the expatriate individual here is treated as an employee and not as a corporation or a shareholder in a company. As per UAE laws it is only the companies, which can claim bankruptcy.

What can you do in case you lose your job in Dubai and you have unpaid loans or post-dated cheques?

I advise a person to contact the party to whom he/she issued the cheques. If it's a car loan, it is advisable to sell the car and try to repay or reschedule the loan and reach an amicable solution with the creditor.

It is always better to try sort things out amicably and banks and concerned authorities will understand the situation.

The worst-case scenario if the person leaves the country is to appoint someone on the person's behalf to try resolve the financial problems. Otherwise the person would really lose more on the longer run since their assets will be sold very cheaply and will not cover the initial price.

The person who leaves this country without covering his/her unpaid loans or post-dated cheques can be reached anywhere except in Israel, and that person could be sued civilly in the country where he/she stays.