Debt Settlement in UAE

The transition of the United Arab Emirates from a small nation to a thriving modern-day business center in the Middle East that is abode to almost every major corporation and organization from around the globe is quite remarkable. As infrastructure, employment opportunities, and standard of living improved, individuals began to migrate to the UAE in pursuit of better rewards.

As an outcome, more than 80% of expats work, reside, and contribute to the UAE’s economic growth. Many travelers who migrated to the UAE or who are looking for swift credit use credit cards negligently, resulting in debt buildup.

Debt is a financial responsibility owed by a person or organization for a received product or service, loan, or any other obligation with monetary value. Unless there is a conflict, having debt is not a bad thing. Missing a committed payout, a bounced cheque, failing to return loans and agreed-upon markups on time, and failing to pay medical or other service bills are all activities that result in the debtor becoming a defaulter.

People are unable to make repayments on time due to a variety of factors such as volatile financial conditions, loss of employment, and personal issues. The main impact is that the user becomes entangled in a financial mess, as interest accumulates on top of the principal, making repayment of the unpaid financial responsibility much more challenging.

A criminal complaint may be filed against the person if he/she exits the UAE without clearing the dues. If you do not pay your bills on time, whether you are in the UAE or elsewhere, you may have a challenging time.

Classifications for Types of Loans

The United Arab Emirates Central Bank set guidelines for the classification of loans and their regulations. The regulations stated that loans and advances provided by financial institutions would be categorized into one of five levels based on their scenarios, such as:

Level 1 – Normal/Ordinary Loans: These are loans with standard banking risk.

Level 2 – Watchlist Loans: These are loans that demonstrate some vulnerability in the debtor’s financial position and creditworthiness, necessitating more attention than usual.

Level 3 – Sub-standard Loans: These loans may result in some loss due to unfavorable factors that may prevent repayment. This category typically includes loans that are in repayments for more than 90 days.

Level 4 – Doubtful loans: These are loans whose recovery appears to be in doubt based on available information.

Level 5 – Loss Loans: These are loans in which the bank has drained all available options but has failed to recover all or a fraction of the loan.

Debt Settlement

Debt settlement, also known as debt-resolution or debt-negotiation, is the method of negotiating settlements with the debtor’s creditors.

A borrower enters into a debt settlement agreement when they are unable to pay their creditors the entire amount of their debt. Rather than declaring bankruptcy, the borrower may try to negotiate a debt settlement with their lenders.

Bank Debt Settlement

Banks traditionally offer various types of loan facilities such as:

  • Credit cards
  • Personal loans
  • Vehicle financing
  • Corporate needs financing
  • Real estate financing/mortgages

Numerous banks provide promotional and other deals to individuals in order to resolve bad debts, with credit card loans and personal loans usually receiving priority. These deals may include discounts of up to 60% in the case of an immediate settlement of current liabilities or loan restructuring at a lower interest rate. Several banks also provide the option to postpone repayments if the debtor has lost his or her job.

Banks in the UAE negotiate the settlement of bad debts for persons on a case-by-case basis, taking into consideration a variety of factors such as the debtor’s earnings and the magnitude of their default.

Debt Collector

A debt collector, also known as a collection agency, is a firm or organization that recovers money owed on past-due accounts. Debt collectors are frequently hired by businesses to collect money owed to them by borrowers. These debt recovery services are typically provided for a flat fee or a percentage of the borrowed funds eventually collected.

debt collection agency or organization offers various services. Some of them are:

  • Find the whereabouts of defaulting debtors.
  • Verify and reconcile the amount owed.
  • Examine existing paperwork such as credit agreement, payment terms, and so on.
  • Assure that the identified scheduled amounts will be collected.
  • Acquire a written commitment from the borrower to pay the full amount owed or a fraction of it, such as a cheque or a written affirmation of debt, etc.
  • Negotiate and consent on payment terms with the debtor.
  • Provide regular status reports.

Debt recovery services in Dubai can assist lenders in collecting their debt outside of court. A competent debt collection agency gathers all relevant data on the debtor. They then contact the borrower on behalf of the creditor in a very professional manner to inform them of their outstanding debts. They attempt to notify the debtor of the potential legal ramifications if liabilities are not paid on time.

Process for Debt Collection in the UAE

Even though banks favor reaching cordial settlement terms with deferring borrowers, there are several legal procedures that banks may undertake against their debtors if such courteous settlement efforts fail. If the debtor is unable to uphold his or her commitments to the bank, the bank sends the debtor a few non-payment or late payment alerts before taking legal action.

The bank can petition the courts to receive payment from the borrower by filing lawsuits, but many banks prefer to use the security tools at their disposal. In the case of real estate mortgage loans, for example, the bank may sell the mortgaged property to make the payments or present a security cheque for compensation, and if the cheque is returned as unpaid, both civil and criminal action could be taken against the debtor. The bank may also plead with the courts to proclaim an offending debtor insolvent.

Entering into legal proceedings is not ideal for debt collection. To retrieve their debt, the creditor looks for alternative methods or follows an out-of-court procedure. Most of the time, this is faster, more responsive in contexts of debt collection, and less expensive than a judicial process for the same.

Debt Settlement Fund

The Debt Settlement Fund was established in 2011 as a venture to alleviate the pressure of personal loans on UAE citizens with low incomes.

When applying to the Debt Settlement Fund, the mentioned debtors have priority:

  • Detainees held in custody for existing debt.
  • Debt holders against whom court decisions are issued.
  • Debtors who are investigated by the police.

To be eligible for financial assistance from the Debt Settlement Fund, the claimant must be a salaried UAE citizen with earnings or a stable source of income.

How Bin Eid Advocates Can Help You?

To handle your debt collection, we have the finest debt collection services in Dubai, Sharjah, Abu Dhabi, and other parts of the UAE. Whether it is non-payment of loans or bounced cheque recovery, we can assist you in that. Our trained and dedicated team understands how to handle such cases successfully and responsibly.

Our Dubai law firm employs a number of skilled attorneys who work on all aspects of collections and assist in the recovery of funds through negotiations, resolution, intervention, or even criminal and civil lawsuits. Our team of debt recovery solicitors creates a recovery strategy that is tailored to your specific situation. Our team thoroughly investigates the guidelines and possibilities, allowing us to come up with the best solutions in all possible cases.

In today’s economy, many truthful, honest, and decent users are experiencing tough financial situations. Insolvency is a workable solution for some people, but it is not the best solution for everyone who is trying to get out of debt. Paying off existing debts can take years, if not decades, of debt repayment and the continued high accrued interest.

Debt collection is a difficult task that requires a great deal of experience for debt collection services to retrieve bad debts on behalf of lending institutions in a professional manner. It primarily includes cases involving late bills for businesses, personal liability for oneself, and amounts owed to bounced cheques.

Get in touch with us to review your specific case. Our competent team of lawyers will analyze your financial situation and advise the best possible settlement approach.

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