The Debt Panel: 'I'm caught in a debt trap. How do I get out of it?'

The Dubai accountant owes Dh243,200 and is struggling to keep up repayments on her Dh8,900 salary

Illustration by Mathew Kurian 
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I work as an accountant in Dubai, earning Dh8,900 and I am struggling with my credit card repayments. For the last four years I have been making the minimum payment on the cards, which I know only goes towards the interest. I used to have a part-time role as a bookkeeper, earning an extra Dh700 a month, taking my total income to Dh9,600 but the company decided to close in January this year. 

My debts are: outstanding balance / monthly repayment

Credit card 1 converted into a loan: Dh64,000 (Dh1,885)

Credit card 2 converted into a loan: Dh37, 600 (Dh1,160)

Credit card 3 converted into a loan: Dh20,000 (Dh1,000)

Credit card 4: Dh30,600 (Dh1,850)

Mortgage in the Philippines: Dh71,000 (Dh900)

Personal loan: Dh20,000 (Dh600)

Total: Dh243,200 (Dh7,395)

Most of my monthly income goes towards paying my debt and the rest between remittances and personal expenses. Because my income is not enough, I ask friends to make purchases on my card and then give me the money (instead of me taking a cash advance). I then pay my card at the end of the month to avoid defaulting. I know I am in a debt trap.

My monthly expenses are Dh1,000 for rent, Dh230 for transport, Dh160 for phone and Dh800 for remittances. I ran up these debts seven years ago when I took out a loan to put down a deposit on a town house in the Philippines. Apparently I was conned by the agent, who did not pay the deposit, and I had to send the money again as I was bound by a contract. 

I no longer make any purchases for myself on the cards and I have also approached the banks to resolve my problem. I asked to convert my balances into a loan to lessen my monthly dues. While three banks have already restructured, the lender for credit card 4 will not approve my request.

They did give me an offer though: no interest for 18 months as long as I pay Dh1,800. Although this is a good offer, I cannot afford the Dh1,800 — this will drain me. I can only afford Dh900 or Dh1,000 but they are ignoring my plea. The discussion has been going on for two months and they are happy to charge me late payment and over-limit fees in the meantime. How can I convince the lender to convert the balance into a loan?

The bank keeps calling, sending me messages and emails. They talk about downgrading me with the Central Bank and proceeding with legal action. Can they file a case to prevent me from travelling? I have not left Dubai for two years and I need to travel home for some matters concerning my town house and my parents.

My situation would improve with a second job but that is unlikely now with the current market conditions and this applies to a salary increase in my regular job as well. My remittance is not enough to support my two ageing parents, who have no source of income. My sister has a job now, but it's a meagre salary and just enough for her and her son. What can I do? MA, Dubai

Debt panellist 1: Shaker Zainal, head of retail banking at CBI

As you are overleveraged and it is not possible for you to service your debt payments with your current income, you have two options: either increase your income or decrease your monthly debt payments.

While a bank can file a police case when a borrower defaults on a loan, some banks may not file immediately and try to collect their receivables through their own efforts first.

The Central Bank of the UAE applies a cap on the maximum amount of total debt an individual can have. This is to protect individuals and prevent them from being overleveraged. Your debt burden ratio (DBR), which is measured by your total monthly debt payments, divided by your monthly income, should not exceed 50 per cent at any point. Even when we exclude your mortgage payment in the Philippines, your DBR is over the maximum threshold allowed by the regulator. This effectively means getting incremental loans is not an option for you.

To reduce your total monthly debt payments, consider selling your house and using any surplus cash proceeds after your mortgage payment, to close off some of your loans. When you have sorted out your finances, you can always consider buying a property again in the future. This will reduce your monthly cash flow and provide relief, enabling you to take up the bank’s offer to waive interest for 18 months as well.

Alternatively, if you have any other liquid assets in your home country or in the UAE, consider selling those assets to ease your temporary financial distress.

While a bank can file a police case when a borrower defaults on a loan, some banks may not file immediately and try to collect their receivables through their own efforts first.

Please note that a travel ban can only be imposed on an individual through a court order. If you have a bounced cheque on any of your loans, the bank is entitled to open a criminal case against you, and you will be issued a travel ban order. Get in touch with each bank and learn the latest status of your case with them.

Debt panellist 2: Ambareen Musa, founder and chief executive of

It is easy to grow dependent on credit cards. But this easy access to debt can turn into a dangerous habit. If you've started relying on your credit cards to put food on the table and keep your head above the water, you're already treading in risky territory.

It's clear you are financially overextended. Even after restructuring the majority of your credit card debt, you are unable to keep up with your monthly debt repayments. This is a clear sign you will have to make a big change to remedy your current financial situation.

Late payment and over limit fees are not the only things you will have to worry about. The exorbitant interest rate on your credit card will multiply your debt month after month and make it even more unmanageable. And, as you've allocated every dirham of your salary towards debt repayments, even a single financial emergency or crisis can end up knocking down your repayment strategy and burying you further into debt, fees and penalties.

Now you need to make some tough choices. Consider selling your property in the Philippines. If you don't have any other savings or investments you can liquidate, selling your home might be the only way for you to beat your debts. You can use the sale proceeds to settle most, if not all of your credit card debt.

Not only will this help you wipe the slate clean on the debt front, but you end up saving a significant amount of money by paying off your debts early. You can potentially negotiate with the banks to lower the credit card settlement amount, since banks usually prefer a lump-sum repayment. Just make sure you are well aware of the current real estate trends to evaluate whether this decision makes financial sense.

Debt panellist 3: Keren Bobker, an independent financial adviser with Holborn Assets

Having debts of Dh243,200 with monthly payments of Dh7,395 on a salary of Dh8,900 is never going to be a viable situation. As an accountant I would expect you to understand what you can realistically afford.

The fourth bank is unlikely to consolidate as you are already well in excess of the Central Bank’s DBR. There is nothing you can do to convince them, although they should not be calling you daily. Given the situation, their offer to suspend interest is not unreasonable. If the bank believes you may leave the UAE and not return, they can apply to the courts for a travel ban. Given the situation I think it likely a ban would be granted. I would also question how you would pay for a trip home if you have no money to pay your liabilities.

I appreciate you are trying to support your parents but you must ensure you do not get into deeper trouble yourself. The Philippines has a State Pension scheme, usually payable from age 60, for those who have worked in the country and paid into the system, so your parents should have some income. The job situation is difficult but there are still opportunities. Keep looking for a role with a higher salary or additional work if your employer permits.

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