Bankruptcy Law FAQ’s
Here is a list of frequently asked questions about bankruptcy law. A piece of detailed information about bankruptcy law and legal terminologies used in bankruptcy law. Information about chapter 7 and Chapter 13 of bankruptcy.
What is bankruptcy?
When a debtor losses the power to repay all or some of his debt to the creditor, he/she becomes bankrupt, hence, he/she can now let the creditor know of its inability. The inability to pay the debts is called bankruptcy.
Who can file for bankruptcy?
A person having no means of paying back his debt to the creditor can file for bankruptcy. In most of the cases, it’s the debtor who files it through a court of law. The court after the debtor has filed for bankruptcy and the court accepting it, will now safeguard the debtor from any further lawsuits or litigation.
Also Read: Legal Services in UAE
What happens when bankruptcy is filed?
Usually, when an individual or a business has filed for bankruptcy, they work along with the creditor to pay all or some of the debt that they have accumulated. It could be in the shape of selling off assets of the debtor or rescheduling the terms of debt.
What happens if I file bankruptcy in UAE?
Unlike the western world, UAE does not eye bankruptcy as a civil offense; rather they eye it as a criminal offense. If an individual or a business is unable to pay their debt in time, the creditors in UAE reserve the right of sending them to jail as per the laws of UAE. The jail sentence can be of a minimum of 3 years.
Are there any laws for bankruptcy in UAE?
Yes, there are certain laws covering bankruptcy in UAE, but they don’t apply to individuals only to businesses and that too owned by the Emirates.
Why would the creditors in UAE want to keep me in jail when they know I can’t pay them off from jail?
Interestingly, UAE creditors; mostly the banks, practice sending debt defaulters to jail in anticipation that someone from their peer group will come up and pay their debt. In cases where no one came up to rescue the debt defaulter, the banks kept the defaulter in jail, just to make an example out of them for others.
What if I flee UAE citing upcoming debt default?
This is when the creditors in the UAE use the services of a debt recovery collection agency. These agencies are well versed in locating and going after the debtor in their home country.
How does debt recovery collection agency work?
These agencies have agents working for them on commission and their task is to maximize the debt collection from the debtor. Often, these agents are uneducated, ruthless, and unapologetically rude. They will visit debtors’ homes, work, friends, family, co-workers, and sometimes even clients to put pressure on the debtor.
Can a creditor legally reclaim the debt in my home country?
UAE has trade treaties with several countries around the world. These treaties somehow protect the rights of creditors in UAE as well. It must be kept in mind that the creditors’ first option is to get the debt recovered from the debtor with minimum hassle, however, if need be, the creditor can initiate a process of debt collection in the debtors home country but it is the last resort as the cost of doing so is expensive.
Can one travel to other parts of the world if fled from UAE without clearing debts?
One of the initial steps that the creditors take against the debt defaulter is to put their name in the red notice of the Interpol list. The red notice helps UAE in knowing if a person has traveled outside their country. Particularly in GCC, if a debt defaulter travels, they can be arrested on the port of arrival, even if they are just transiting.
Many times UAE debt defaulters claim that their name is not on the list of Interpol, which is because UAE knowingly hides the names of its wanted persons.
How long does a debt stay outstanding against someone’s name?
In most countries, a debt stays outstanding for a period of 6 years against a person’s name, however, in UAE the term is for 15 years. The creditor still has the option of increasing this 15-year term through a court in UAE.
Can a debt defaulter go back to UAE?
In cases where the debt defaulter found a job back in UAE and now intends to take this job, they must first pay off the debt in full. Otherwise, UAE authorities will arrest them on the port of entry and will keep them in jail until the debt is paid in full.