I have a personal loan of Dh40,000 ($10,890) from a bank in the UAE. However, due to job loss and tough financial circumstances, I defaulted on my loan payments many times. I used to make regular loan instalments when I was employed.
A few days after sending the email, a bank representative called me offering a 50 per cent discount on the loan for them to stop pursuing the case. However, I was asked to pay the full amount in a one-time payment.
Since I cannot pay the amount as a lump sum, I asked if they could offer the discounted amount as an instalment plan. They refused and said they will proceed with the legal case.
I still haven't received any notification from Dubai Courts. I am worried about the arrest warrant and travel ban. Is the bank trying to intimidate me? How can I find out if their threat is real? PB, Ajman
Debt Panellist 1: R Deepakchandran, group head of retail products at Emirates NBD
By proactively setting aside funds for unforeseen circumstances, financial planning offers a sense of security and peace of mind against unexpected financial setbacks.
By having a strategic plan in place, individuals can maintain control over their finances and avoid falling into debt or compromising long-term financial goals.
When incurring unplanned debt, which is difficult to service, it is very important to tell your bank and constantly communicate your financial situation so it can work with you on a long-term solution.
In your present circumstances, it is recommended to reach out to the bank's collections team explaining your situation while expressing your commitment to repay the debt.
The bank can provide you with comprehensive details on your total outstanding balance, including any applicable fees and charges.
With your willingness to settle the debt, most banks are likely to assist you in restructuring your loan, enabling lower monthly payments with a discounted interest rate.
In situations involving arrest warrants or travel bans, seeking legal advice is crucial. It is advisable to promptly consult a lawyer who can provide you with the necessary information and guidance regarding this matter.
Additionally, you may also check the status on the public prosecution website for further updates and clarifications. By doing so, you can obtain accurate insights into how the travel ban may affect your specific circumstances and determine the appropriate steps to effectively address the situation.
Paying down the loan in your current situation is difficult, but with a clear plan in place, you will be able to regain your financial independence.
Debt Panellist 2: Alison Soltani, founder of Leap Savvy Savers
You can check travel bans and any arrest warrants or court proceedings filed against you by visiting the police website or app pertaining to the emirate in which you reside. Type your Emirates ID number in and check your legal status.
An unpaid debt is usually first assigned to the collections department, which will attempt to retrieve the money through negotiations with the customer.
There are regulations for debt collectors, such as contacting the customer within a reasonable time frame and limiting the number of attempts they make contact per week. If the debt remains unsettled, the bank can then file a case in court.
A travel ban may be issued as well as the debtor’s assets seized to pay the debt. In extreme cases, an arrest warrant might be issued, and debtors may face up to three years in jail, although you would typically be summoned to court first.
You have a few options. The first is to carefully review the terms and conditions of the loan. The consequences of defaulting and the bank’s actions in such circumstances will be detailed in your signed loan contract.
Next, you could contact the bank and make as large of a lump sum repayment as you can. Then negotiate monthly repayments at a lower interest rate or increased loan tenure.
However, as you mentioned that this may not be possible for you. Another option is to file for insolvency. In 2019, the UAE introduced an insolvency law that aims to protect borrowers from legal consequences.
If you file for insolvency, you will not face the threat of prison and legal prosecution. You can remain employed while working with a court-appointed expert to make a three-year repayment plan to clear your debts.
However, there might be certain restrictions placed on you during the loan repayment period, such as travel limitations and full disclosure of your assets and liabilities. If this seems like a viable option, you may wish to appoint a legal specialist to oversee the process.
If you feel at any point intimidated or unfairly treated by the bank, you can file a complaint with the UAE Central Bank on their website or by calling 800CBUAE (22823).
It is advisable to remain in contact with the bank and authorities and consistently express your wish to repay the debt. Proceeding with this mindset will increase the likelihood of assistance and decrease the chance of legal consequences.
Once you have resolved this situation, it is advisable to build an emergency savings fund of at least three to six months’ worth of expenses to protect you in these sorts of situations in the future.
Debt Panellist 3: Hannah Greenwood, chartered financial planner and senior executive officer at Finsbury Wealth
I am sorry to hear about what you are going through. I understand that this can be extremely stressful.
The good news is that this was acknowledged by the UAE with the introduction of the new insolvency law, which is designed to be able to support you during this difficult time.
The law decriminalises your financial obligations and allows you to agree on a three-year plan to help you repay the loan amount.
The suspension of criminal proceedings against you shall remain effective while the settlement proceedings are continuing. The law can also sometimes assist by presenting you with opportunities to work.
The process to apply for insolvency in the UAE is now fairly simple. The first step is that you will need to file an application with the court and register your case for insolvency.
You will then need to prepare the relevant documents to submit with your application. These include statements of your income, your current necessary expenditure and any assets that you hold globally.
You will also need to share confirmation of your debt with the creditors' information and a proposal for settlement of the debt.
If the case is accepted, they will assign you to an expert who can help you put together an arrangement on how you will settle your debts.
There are fees for the expert’s services and the judicial proceedings, however, the law allows provisions for delayed payments.
I hope you can get a settlement agreed as it can create a payment plan for you to repay the debt over a three-year period.
Please note you will be likely prohibited from taking out any further loans or any new debts during this time.
The Debt Panel is a weekly column to help readers tackle their debts more effectively. If you have a question for the panel, write to firstname.lastname@example.org