Dubai: The focus of the UAE’s new insolvency law for natural persons approved by the UAE Cabinet on Sunday is not the enforcement of collection, but protection to honest and unfortunate debtors and their families, according to a lawyer who has handled several debt cases.
“I have been receiving requests for assistance on loan settlements on a daily basis,” lawyer Barney Almazar of Gulf Law told Gulf News.
“They don’t want to run away from their liabilities. They wish to stay and work in the country, but despite their good faith intentions to honor their obligations, they feel helpless. Worse, they are facing multiple police cases and accumulated overstay fines. The insolvency law provides hope for such people.”
He said the law provides a “breathing space” giving debtors direct and often immediate relief. “The opportunity to develop a payment plan gives the debtor a tremendous sense of relief from anxiety, guilt, and shame from constant harassment by creditors.”
This situation of hopelessness, he said, is even aggravated by societal pressures of being branded as failures, and in extreme cases may even lead to suicide. “Worse, the children of distressed debtors suffer through no fault of their own.”
Correcting debt collection method
The insolvency law aims to correct the two main weaknesses of the typical enforcement of debt collection, said Almazar who is also the head of the monthly free legal aid at the Philippine missions in the UAE.
“The first is the ineffective criminal prosecution under Article 401 of the Penal Code (issuance of bounced cheques) in blindly pursuing enforcement actions through coerced payments. The second is the inequitable bargaining positions among creditors.”
By taking into account the interests of all creditors at once, he said, the law ensures a fair distribution of available value among all creditors.
Ahmad El Sayed, senior associate, commercial litigator with Charles Russell Speechlys in Dubai, said the new law complements the Insolvency Law issued earlier for businesses.
It takes into consideration the category of individuals that are subject to the Civil Procedure Law, which grants creditors proceedings against the debtor, including upon execution, seizure of all debtor funds, passport confiscation and imprisonment if he fails to pay without providing clarification of the reasons that led him to do so, he pointed out.
Tracking debtors’ status
“The law is balanced and safeguards rights of both parties by granting debtors flexibility and fair repayment opportunities under legal supervision and ensures the creditors are able to track debtors’ financial status and possibility of repayment during a reasonable period of time through the financial expert appointed by court which facilitates the execution of judgments and the collection of funds according to fair and thoughtful framework,” he said.
“The law prioritises payment of debt through a fair process for both parties by giving the debtor an opportunity to work and repay his debts instead of losing his work as a result of incarceration, which in turn contributes to alleviating the accumulation of cases.”
Emirati lawyer Yousif Al Bahar said the new law is very important in regulating the economic and financial life of individuals who are insolvent and unable to manage their finances.
“It will help maintain the family bonding of the insolvent people and rearrange their financial matters in cooperation with a financial expert.”
“It will play an important role in the economic life in general through the continued ability of individuals to meet their financial obligations, whether bank loans or payments to various parties, and thus [offering] continuity in advancing the business and economic activity in the market.”
Al Bahar said that the clear time frame of three years for repayment leads to more reassurance in the market.