I am 30, from India and was born and raised in the UAE. After graduation I worked in Dubai for over seven years. I quit my financial services job in March after several months of not being paid. My employer has not paid my salary since December last year; my end-of-service benefits are also pending. I’ve now been looking for a job for seven months. I also have some debt obligations, which I ran up paying family medical bills and supporting myself during unemployment:
Outstanding balance / monthly payment
Personal loan: Dh55,000 (Dh2,326)
Car loan: Dh19,100 (Dh1,650)
Credit card 1: Dh9,500 (minimum balance)
Credit card 2: Dh20,200 (minimum balance)
Total: Dh103,800
I’ve met most of my monthly payments this year by borrowing or taking handouts from family and friends, but I have un out of options after so long with no income.
Unfortunately, the bank where I took the personal loan, has filed a criminal case against me for dishonouring the guarantee cheque (ie a bounced cheque case). They are aware of my situation but told me this is not their concern.
The same bank filed a similar case in March, but I managed to pay the pending dues then and the case recall fee of Dh525. Now I have this bounced cheque case and a travel ban and the bank has also been threatening a civil case.
Can the bank file a civil case against me to make me pay the entire value of the cheque? This would be unfair as I have already paid a significant amount against the principal value.
My employer owes me Dh90,000 (this is Dh39,000 in salary, a Dh48,000 gratuity and Dh3,000 in leave pay and commissions). I have submitted a letter from my ex-employer to the bank stating they owe me this amount.
My ex-employer also sends me threatening emails saying if I approach the free zone mitigation authority or the Labour Courts, they would declare bankruptcy and abscond the country without paying what they owe me. I have now initiated the mediation process with the free zone. The case should advance to the Labour Court soon unless they file for liquidation then it would be a challenge to recover the settlement as they are a service company with no tangible assets on their balance sheet.
I’ve been in my home country since June as my visa expired, I'm stuck and not able to come back and get a proper job in Dubai due to the travel ban and the criminal case. I have not secured a job in India as my experience is in the Middle East. It would also be very hard to pay my debts from here due to the exchange rate between the two countries.
When I was in Dubai I earned Dh15,000. My expenses came to about Dh13,500 including debt payments and I was able to save Dh700 to Dh1,000 a month. It was not being paid my salary for so long that caused the issues to spiral. What is the best way forward and can the new insolvency law help? SL, India
Debt panellist 1: Philip King, head of retail banking at Abu Dhabi Islamic Bank
While the rules regarding bounced cheques in Dubai changed in 2017, the banks can, for now, register a police case for the missing at least three monthly repayments. In your situation, it is advisable to consult with a lawyer to help you navigate through possible legal issues, as well as with a debt consultancy agency to assist you in negotiating a reasonable repayment plan. The new insolvency law will only come into effect in January 2020 and remains to be tested based on the circumstances of the debtor.
Of course, you also need to think longer term, about how you will get onto a sustainable financial path. This involves securing a job to help you address your debt obligations and working out a sound budgeting plan that trims down your expenditures and increases your savings and emergency buffers.
As for your pending salary and end-of-service benefits, you have taken the right action by escalating this to the Labour Courts. Once settled, you can use your benefits to reduce your debt exposure.
The new federal law is expected to decriminalise insolvencies, and allow individuals to settle financial obligations through a court-appointed expert. It will enable individuals who are facing existing or anticipated financial difficulties to reschedule their debt settlements within three years with the advice of experts appointed by the court. Depending on circumstances, it will also provide people in your situation with the opportunity to be granted new concessional loans.
Debt panellist 2: Ambareen Musa, founder and chief executive of Souqalmal.com
The UAE's new insolvency law has been introduced to help borrowers like yourself, who have no realistic way of repaying their debts. But of course, the provisions under the new law come with their own set of terms and conditions. For starters, debtors can request a court-approved repayment plan only if they're about to default on their monthly payments or have missed a repayment within the last 40 days.
You mention that you've managed to meet most, but not all, of your monthly debt obligations this year. You were also unable to meet your personal loan instalments in March, which landed you in legal trouble with the lender. And since you left the UAE in June this year, it may be safe to assume you have crossed this 40-day threshold.
The new insolvency legislation also allows for the systematic liquidation of a debtor's assets. Your car is an example of an asset that can be sold to pay off your creditors. Other financial holdings, and movable and immovable assets whether in the UAE or your home country are also covered. But it's important to mention that once you declare insolvency, you cannot decide how to liquidate your assets and investments. A court-appointed expert will be in charge of the liquidation process.
Regarding the bounced cheque criminal case filed against you, the new insolvency law does not decriminalise bounced cheques. However, it offers you the provision of having such a criminal case frozen, if you are able to initiate bankruptcy proceedings in a civil court. Note, though, Dubai's regulations on bounced cheques are different to the rest of the UAE and result in fines rather than jail time.
Now that you're in India, it would be best to appoint a legal representative in Dubai. A lawyer can approach the local court here and submit your request to declare insolvency. A legal expert would also be the best person to handle the upcoming Labour Court case against your previous employer, and advise on how that can be tied into your insolvency proceedings.
Finally, there were red flags all over your finances before your employer stopped paying your salary. Your expenses accounted for 90 per cent of your income — not a healthy financial situation. With no savings and emergency fund to fall back on, you were living from one pay cheque to the next. That leaves no scope to deal with financial emergencies like the loss of your primary source of income.
Debt panellist 3: Steve Cronin, founder of DeadSimpleSaving.com
We will be seeing many of these "debt chain" cases coming through the new insolvency process, where the near-bankruptcy of an employer leads to non-payment of salary, which causes the employee to default on their debt obligations.
It is not your fault your employer stopped paying your salary, but this problem has been made worse by you saving less than 10 per cent of your salary each month. Building up a cash buffer of six months’ expenses would have given you more breathing space.
You were right to quit your job but you must have known the consequences for your debt if you weren’t able to find another role. Have you tried searching for jobs in other Middle East countries where the financial sector is similar to the UAE? Getting a job in Saudi Arabia or Kuwait could take the longer-term pressure off you.
Meanwhile, try to raise any funds you can, either from doing administrative work, finding small projects online or leaning on friends and family.
You can file an insolvency request at the court while outside of the country through a legal representative. While this is untested, it seems unlikely the court would force you to pay off the entire guarantee cheque even though you have paid off much of the principal.
You are right to pursue your former employer, though as you say they may have few assets to liquidate. Limited liability may prevent courts forcing the owner to liquidate their own assets. However, absconding is no longer such an easy option, with the increasing ability to chase debtors in their home countries.
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 pf@thenational.ae
