The Debt Panel: 'I paid a court fine for unpaid dues. Now my bank is filing a civil case'

The mother of three from the Philippines, who spends more than her salary every month, thought the issue was resolved in 2016

Illustration by Mathew Kurian 
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I signed up for a credit card and loan in 2013 with a lender in the UAE to pay my children’s school fees and the rent. I defaulted on my repayments in 2014 and 2015 when my husband’s salary was delayed by his employer. The bank filed a police case, which was then transferred to the Dubai Prosecution. I paid a fine of Dh3,020 in June 2016.

Three years on and the lender has started calling me again about the same debt. They informed me they will file a civil case if I don’t pay off the outstanding balances. The initial debts were Dh12,000 on the loan and Dh25,000 on the credit card, however, the credit card has now escalated to Dh300,000 due to interest and charges.

The bank has demanded settlement of Dh60,000 but before I start any communication, I want guidance on how to proceed. Firstly, can the lender legally file a civil case if the police case is more than three years old? I read that a civil case must be filed within three years from the date a police case was lodged. As it is now more than three years, do they still have a case?

Secondly, the lender’s settlement offer is not acceptable in my opinion, as they want me to pay more than I owed before all the issues happened.

If I am still legally liable to pay them, I am willing to settle to clear my name and dues. However, I cannot afford Dh60,000. Both my card and loan had a credit shield, which I was being charged per month. Surely, they have claimed from this for the default, so I want to settle at a reasonable amount. I earn Dh9,400 in Dubai, which is swallowed up by our expenses (rent and bills: Dh2,500; groceries: Dh3,000; school fees for our three children: Dh5,250. Total: Dh10,750).

While my husband is earning, his salary goes towards the debts he has: a loan (Dh207,196) and two credit cards (Dh5,000 and Dh18,000) with a total outstanding amount of Dh230,196.

I have other debts as well: (outstanding balance / monthly payment)

Car Loan: Dh14,439 (Dh1,552)

Personal loan: Dh4,698 (Dh1,566)

Total: Dh19,137

I have no savings to settle the demands from the lender and I realise we are in negative territory. Ultimately, we want to consolidate our dues so that we can manage everything. What do you advise? MM, Dubai

Debt panellist 1: Philip King, head of retail banking at Abu Dhabi Islamic Bank

When one defaults on a debt, the bank may cash the security cheque initially provided by the debtor to recover the outstanding dues. In the event this cheque bounces, the bank has the right to file a criminal case against the debtor.

In general, the UAE Civil Law limits the debt recovery period to 15 years unless a specific provision indicates otherwise. If this is the case, the bank has 15 years to chase unrecovered debts.

A criminal case bears a penalty of either a jail term or an imposed fine. However, serving detention or paying a fine does not mean that the debt is cleared, rather it only negates the criminal act of issuing a bounced cheque. At this point, as the debtor, you are still expected to continue repayments and settle the financial obligation. Because you have not made any repayments in recent years, it is possible the bank subsequently filed a civil case for collection.

Seek legal advice on how to tackle this. Your legal representative may investigate the nature of the case, and shed light on the applicable statute of limitations. In general, the UAE Civil Law limits the debt recovery period to 15 years unless a specific provision indicates otherwise. If this is the case, the bank has 15 years to chase unrecovered debts.

It is also important to start communicating with your bank to get a full assessment of your case. Request the details and terms of your obligation, such as how much the total debt was as of 2016. How much were the penalties and charges that eventually led it to balloon 10-fold from Dh37,000 to Dh300,000? What did the credit shield cover when you defaulted? Why did the insurance fail to cover all the dues?

Your legal representative may help you negotiate with your bank to waive off the repayment rates and late penalty charges. In addition, you may also propose a sustainable repayment plan that will allow you to comfortably settle the remaining amount.

It would also be helpful to have a prudent financial approach by working out a strict budget that cuts down unnecessary expenses, and allocates some of your earnings towards settling your outstanding borrowing.

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

Your dependence on debt is alarming. With the current loan commitments, outstanding credit card debts, inactive (but still legally due) debts on your as well as your husband's list of liabilities, this situation demands immediate attention.

Regarding the legality behind when and under what circumstances a bank can file a civil suit against a borrower, it is understood that under UAE Civil Law, lenders in the country are allowed a period of 15 years to legally recover a debt. So your lender can still file legal charges against you as part of its debt-recovery procedures.

This also means that debt collection agents can still chase you to recover inactive debts. In fact, the calls you've started getting now are probably because your outstanding dues have been rolled over to a new debt collection agency or the lender is now using more aggressive ways to recover old debts.

A legal representative can not only help you avoid being embroiled in another court case, but also help you negotiate with the bank and arrive at a reasonable settlement. But before you do that, get a hold of your credit report from the Al Etihad Credit Bureau. Review this report to see if your outstanding credit card dues have indeed multiplied the way the lender claims to understand how the lender arrived at Dh300,000.

Addressing your point about credit shield, there's no way it could have allowed the bank to compensate for the unpaid debts. Credit shield simply provides insurance coverage against your financial liability towards an outstanding credit card balance, in case of death, permanent/temporary total disability, critical illness and involuntary loss of employment. And it is the cardholder's (not the bank's) responsibility to claim against an active credit shield. Considering that the primary reason behind your default was financial hardship, a credit shied could not have helped you anyway.

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

It is never wise to borrow on a credit card to meet cost of living expenses because interest rates are very high. It appears that although you paid the fine in 2016, you did not repay the money owed. Usually the payment of a fine is just part of the process and so the bank has continued to add interest and possibly late payment fees in accordance with the terms and conditions of the credit card.

There are limitation periods in UAE Law and these vary depending on the type of claim and legislation applicable and in a situation such as this can be either 10 or 15 years. A time limit of three years only applies in respect of action following a bounced cheque.

Credit shield is an insurance plan offered by some banks and is supposed to cover debt repayments in specific circumstances, such as death, permanent disability and loss of employment. Plans vary between banks but the terms are very restrictive and it has low limits. It does not cover repayments because a borrower has insufficient funds to meet their liabilities so no claim could have been made under this plan.

If the total figure owed is Dh300,000 (including interest and fees), a settlement figure of Dh60,000 seems reasonable. While this is more than the initial debt of Dh37,000 in total, you are liable to pay interest on this sum.

With no money to pay the reduced sum offered, you must negotiate with the lender to settle on a repayment schedule. You then must pay the agreed sum every month to avoid further issues.

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