It’s time for the bankruptcy law

National Editorial
The traditional punishment for those who are unable to pay their debts is to be locked away in prison until they pay up. But, as both legal authorities and creditors often point out, such a course of action is not in place to enable outstanding debts to be repaid, but to deter other debtors from treading down the same path.
This punishment is, as this newspaper has repeatedly argued, both counterproductive and counterintuitive: it creates an unnecessary burden on the state and it does not allow the defaulter the opportunity to pay off his debts. In extreme circumstances, the prospect of prison also prompts debtors to flee the country, leaving their liabilities behind, with no hope of them ever being repaid.
The hunger strike involving a group of businessmen in Dubai Central Prison brings this whole issue back into sharp focus.
As The National reported yesterday, inmates accused of writing bounced cheques have urged the authorities to let them "work to pay off our debts".
To be sure, significant attempts have been made in recent years to find a solution to this problem. And, of course, some may be guilty of fraud, which is a crime.
The first and most obvious step has been the establishment of a national credit bureau that will give lenders information about prospective borrowers' creditworthiness. The agency will become operational next year.
With bank data indicating an increase in lending in the UAE so far this year, better and more accurate data about individuals' creditworthiness promises at least a partial solution to the problem.
Even more important is the need to enforce a bankruptcy law – a draft of which was introduced last year – that will allow borrowers to restructure their debts, rather than face jail. Going bankrupt is, in fact, a crucial element of capitalism and entrepreneurship: competition means some companies will flourish, some will flounder and others will fail.
Even with these measures, the gaps in the system cannot be filled entirely. Nevertheless they will go a long way towards ensuring that debtor's prison becomes a thing of the past.