KT Explainer: How does the UAE Insolvency Law benefit defaulters and creditors

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KT Explainer, UAE Insolvency Law, benefit, defaulters, creditors

Lawyer Copal Al Shazli of Bin Suwaidan Firm for Advocates and Legal Counsels explains to Khaleej Times the process to benefit from the law.

by

Marie Nammour

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Published: Wed 3 Jun 2020, 4:00 PM

Last updated: Wed 3 Jun 2020, 7:27 PM

The insolvency law that was issued by the UAE Cabinet on August 29,2019, and went into effect in January 2020, has been widely hailed by lawyers and legal experts for its positive effects on loan defaulters' lives in general. Lawyer Copal Al Shazli of Bin Suwaidan Firm for Advocates and Legal Counsels explains to Khaleej Times the process to benefit from the law.
Q- What is the basic advantage of the law?
It provides methods for payment of loans while being protected from criminal prosecution - for dud cheques for instance - pursuant to a court order.

Q- What are the procedures allowed under the insolvency law?
Request for settlement of debts (Preventive).
Declaration of insolvency and liquidation.

Q- Are there any restrictions on travel imposed on the defaulter (while availing of this law)?
No. Because he/she is committed by all means to settling his financial obligations or facing insolvency and liquidation action on his estate.

Q- What is the settlement procedure?
An individual, unable to pay up his personal loan(s), can present a request (financial obligations settlement request) at the courts without citing any adversary party.

Q- What to write in the request?
The applicant should mention his financial conditions, sources of income, his profession, his assets (whether movable possessions or real estate), names and addresses of all the creditors (lenders) and statements about the loans, in addition to the bank transfers he did from one year till the application date.

Q- Other additional information?
He/she should also mention any relevant criminal (bounced cheques) cases or civil lawsuits levelled against him/her.

Q- Does the insolvency law stipulate any criminal penalties?
Filing a bogus debt claim or maliciously and illegally increasing a debt invites a jail term and/or a fine from Dh10,000 to Dh100,000.

Q- How the court fees are paid?
The indebted should place an amount of money or a bank deposit to cover the court-appointed expert's fees and expenses. In case he/she can't afford it, he has the option to request a delayed payment.

Q- What to expect from the expert?
After writing up a comprehensive report about the applicant's debts and assets, the expert lays out a three-year plan for settlement, which he discusses with the two parties.

Q- How the proceedings go at the court?
The court issues a decision on the settlement without a trial. If the decision is positive then all the creditors' rights to execution on the indebted's assets are suspended until the procedures of settlement are over.

Q- Is the court's decision final?
The creditors can contest that decision at the Court of Appeals. If the court's decision is not in favour of the applicant (defaulter), he/she also has the right to appeal.

Q- Can the plan go beyond three years?

The settlement plan should not exceed three years. The expert oversees its implementation and keeps the court updated every three months. It can go beyond three years with the approval of the creditors.

Q- Other advantages of the settlement procedure?

The indebted has a three-year time range to settle his dues. In the same time, he still has the power to dispose of his assets and bank accounts as no seizure or execution order is issued by a court against him. His name won't be listed as insolvent.

Q- What are the legal effects of the insolvency declaration?
It has the same legal effects as the bankruptcy. The defaulter won't be able to dispose of his assets, will be denied any new bank loans or facility and won't be able to make any new commercial dealings.

Q- Who files for the insolvency procedures?
The indebted if he defaults for over 50 days after the payment deadline.
The creditor(s) after 50 days from a notice he issued - to no avail - to the defaulter.

Q- Is there any minimum amount for the loan in insolvency cases?
The loan value has to be of a minimum of Dh200,000 if the creditor files for insolvency against the indebted.
mary@khaleejtimes.com 


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