UAE expat residents who find themselves in financial difficulties, indebted to the point where their options are limited, fleeing to the airport with hastily packed overstuffed cases and a one-way ticket out of town, should breathe a sign of relief. The UAE Cabinet has recently issued its long-awaited personal Insolvency Law, meaning the number of abandoned Lamborghinis coated in parking tickets may be no more.

The United Arab Emirates Cabinet has announced the Federal Decree-Law No. (19) of 2019 on Insolvency, intending to regulate cases concerning individuals tacking financial troubles. This new law aims to address financial concerns relating to a natural person, in contrast to current bankruptcy law, which applies to companies and institutions. The new law will give debtors breathing space, by allowing debtors to avoid criminal liability for financial issues, such as bounced cheques. However, although not decriminalized, debtors will be given the opportunity to turn to insolvency law to resolve their debts, without legal action being taken against them.

When settling financial obligations, debtors must first apply to the Court. The application must include an array of evidence from the debtor, such as his financial position, property, income, and occupation. Alongside this, the debtor must declare details of his creditor's and a statement of any judicial actions that may have been taken against him. If the debtor fails to provide the above-mentioned documents, the debtor shall include reasons for this failure.

Where an application is accepted and financial obligation settlement procedures are commenced, creditors rights to claim will be interrupted, unless the creditor holds a mortgage secured debt. Once an expert is appointed, they will work alongside the debtor in settling their financial obligations.

The expert will be in charge of drafting a list of information concerning the creditors of the debtor and a report including the debtors' properties and reasons for failing to repay his creditors. Where the Court accepts the financial obligations settlement procedure, the expert will initiate the plan. If the debtor is found to have concealed or destroyed property, provided false information or has failed to make repayment of any debts for more than fifty consecutive working days, the application may be rejected.

The plan will include a meeting, where the debtor and creditor can discuss and vote on the plan. For a successful vote, it must be attended by a majority of the total creditors, which must equate to no less than two-thirds of the total debts.

Once voted on and approved, the plan must be implemented within three years from the date of the Courts approval. In line with the plan, it will first involve the selling of the debtor's properties to help cover creditor debts.

The expert will report quarterly to the Court on the progression of the plan and where amendment is needed, further approval will be required.The Court may terminate the procedure if the Court feels that there is no possibility of reaching a settlement or if the debtor fails to pay any debts at their due date, for more than fifty consecutive working days. The debtor can also decide to terminate the procedure where he feels it is necessary.

Where the procedures are terminated, the debtor is to commence insolvency procedures, including the liquidating of his properties. Creditor's, for two hundred thousand dirhams, may also apply to the Court to begin liquidating the debtor's properties. The Court will then estimate all fees for the procedure of the insolvency and liquidation of the properties, in which the applicant will be obliged to cover.

Once procedures for insolvency and liquidation are initiated, a trustee will be appointed to oversee the performance, publication of the Court's decision and the creditor's claims. After the final auditing of claims, the trustee is to prepare a report, which the court will decide whether to approve. If approved, liquidation procedures ordered by the trustee will commence and the trustee will sell the debtors properties and use the revenue from the liquidation to repay any claims the debtor owes.

With the introduction of these new procedures, it will assist in the protection of residents of the UAE, by way of offering further protection from legal prosecution. This has helped to offer them the opportunity to work to repay their debts and decriminalize their financial obligations, assisting the country in improving its solvency, as well as increasing its competitiveness and the strength of its economy.

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