KT For Good: What to do if your debt has reached Dh300,000

Our latest campaign called #BeMoneyWise will empower you with all knowledge you need to deal with personal finance.

Our latest #KTForGood campaign called #BeMoneyWise will empower you with all the knowledge and awareness you need to deal with personal finance and avoid its pitfalls. You asked for our advice and here it is. Since our #BeMoneyWise campaign kicked off, readers have been writing in to discuss their financial problems and seek a way out.
CASE 1: 'My salary is not enough to clear my dues'
I am from Mumbai, India, and have been working in the UAE since 2010. My wife joined me in March 2012. I have been using some credit cards and took a personal loan in 2016. But after six months, I lost my job and it took some time for me to look for another. One bank filed a case against me. I am currently working at a firm but my salary is not enough to clear my dues. I am even unable to pay rent, and the total debt accumulated on credit cards is Dh70,000. Now, companies are building a case against me, and they have given me time until November 2 this year. I had also taken a loan to start a ladies' salon but it was a complete loss. My total accumulated debt has reached Dh300,000, and I want to settle this in the future once I get a good job offer. What should I do?
-Sudesh
Almazar: It is a common misconception that the best way to manage debts is to secure new loans to clear past due accounts. This quick-fix solution will only put you in a downward spiral trap.
Getting new loans is not the same as restructuring your loan. Loan restructuring requires careful analysis of your cash inflow and outflow.
Based on your existing cash flow, your expenses are more than your income. The straightforward solution is to find ways to increase your income (new job, part-time job, small business), decrease your expenses, or a combination of both.
If you have a pending police case, you will need to clear it first before you can transfer to a new company with a higher pay.
To decrease your expenses, you may consider the following:
> List all your expenses. Determine which expenses can be eliminated, reduced or deferred
> Control your spending accordingly and always pay by cash
> Take advantage of available programmes with your banks such as payment holidays, benefits and insurance
Once you have applied the above, your cash flow will improve, and you will be in a better position to negotiate with your banks for possible loan settlement options that you can afford.
Don't borrow more money, especially from loan sharks. Regarding the deadline given by your bank, request the legal basis as per your loan agreement.
Banks cannot make arbitrary deadlines. If banks ignore your good-faith offer of settlement, you can request the assistance of the Central Bank, which regulates the affairs of banks and financial institutions in the country.
CASE 2: 'I can't claim my credit card insurance'
I have some credit card dues and availed of 'insurance protect shield' for involuntary loss of job on them. I was terminated from my job recently, following which I filed a claim for my insurance but the company has refused to honour it, stating that I should have informed them within one month of termination (I informed the within 60 days). What should I do?
Also, the same insurance company accepted my claim on another credit card, which I claimed through the bank, but they refused to honour my other credit card. The bank asked me to contact the insurance company directly. - Salim Khan
Almazar: You should refer to the insurance policy. Each policy - even if from the same insurance provider - may be different, especially if the cards were issued from different banks.
Look at the claims procedure stated in the contract. You are bound to observe the terms and conditions stated, including the proper notification period counted from the date of the event which gave rise to your claim.
However, if you have been misinformed by bank agents regarding your insurance coverage terms and conditions, you can raise a complaint and the bank should either provide coverage or refund the premiums paid, in addition to damages if there is intent to deceive on their part.

ABOUT THE LAWYER: Barney Almazar is a director at the corporate-commercial department of Gulf Law in the Middle East, the Philippines and the United Kingdom. He holds a UAE legal consultancy licence and is a lifetime member of the Philippine Bar. He provides monthly free legal aid at the Philippine Embassy in Abu Dhabi and Philippine Consulate in Dubai.

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