Do You Have Debt and Need to Discharge It? A Comprehensive Guide to Debt Relief Under UAE and International Law

       Introduction 
Debt relief is a critical topic, especially for individuals and companies facing financial hardships that may affect their stability. Recently, the UAE has implemented clear legislative frameworks, as have some international laws, to help facilitate debt relief or restructuring. This article covers the legal procedures available, focusing on UAE legislation and international regulations, along with real-world cases and examples.

 

       First: Debt Discharge Under UAE Law 

       1. UAE Bankruptcy Law (Federal Law No. 9 of 2016) 
The UAE issued its Bankruptcy Law in 2016, known as   Federal Law No. 9 of 2016  , which provides a clear framework for bankruptcy and financial restructuring. This law is designed to protect individuals and companies from insolvency and offers various options for debt restructuring, including:

-   Preventive Composition  : Allows the debtor to reschedule their debts and negotiate with creditors under court supervision.
-   Financial Reorganization  : This approach aims to help the debtor avoid bankruptcy by implementing a plan to settle debts over an extended period.
-   Liquidation  : This is undertaken in severe cases of insolvency, where the available assets are distributed equitably to settle debts.

       Case Example for UAE Bankruptcy Law 
One notable case is   Abraaj Holdings  , which was the largest private equity firm in the Middle East. In 2018, the company applied for bankruptcy protection under the UAE Bankruptcy Law. Abraaj sought negotiations with creditors and pursued financial reorganization to allow the company to resume its financial activities.

 

       Second: Personal Insolvency Law 

       1. Personal Insolvency Law (Federal Law No. 19 of 2019) 
To assist individuals facing financial crises, the UAE issued   Federal Law No. 19 of 2019  , known as the Personal Insolvency Law. This law aims to protect individuals from legal action due to debts and provides solutions for debt restructuring, such as:

-   Debt Restructuring  : Individuals can apply to the court for debt restructuring, where a feasible repayment plan can be set up for up to three years.
-   Debt Discharge  : After completing the repayment plan, the court may discharge any remaining debt.

       Example of Personal Insolvency Law 
For instance, if an individual in the UAE faces financial difficulties and is unable to repay their bank loans, they can seek relief under this law to request debt restructuring, allowing them to make repayments over an extended period. After fulfilling the plan, they may be discharged from any remaining unpaid debt.

 

       Third: International Debt Relief Laws 

       1. UNCITRAL Model Law on Cross-Border Insolvency 
On an international level, the   United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency  , introduced in 1997, is one of the key principles. This law aims to facilitate cross-border insolvency cases, especially for companies with assets in multiple countries, through:

-   Cross-Border Cooperation  : The law requires countries to work together to manage assets across different jurisdictions.
- Mutual Recognition of Insolvency Procedures  : These provisions make it easier to settle debts when a company is multinational or when creditors are located in various countries.

Case Example of International Insolvency Law
A prominent example is the (Lehman Brotherscase,) which declared bankruptcy in 2008. With assets and investments spread across multiple countries, the UNCITRAL Model Law was activated, allowing countries to coordinate in managing the assets and ensuring creditors' rights globally.

Fourth: Prominent Legal Cases Related to Debt Discharge 

1. Commercial Bank of Qatar Case
An investment company based in the UAE faced mounting debts after an economic downturn and applied for bankruptcy in both the UAE and Qatar. The courts in both Qatar and the UAE applied their local insolvency laws and the UNCITRAL framework, allowing for multi-jurisdictional debt settlement.
2. Dnata Group Case in Dubai
The Dubai-based real estate Dnata Group sought bankruptcy protection under the UAE Bankruptcy Law. The company utilized preventive composition to restructure its debts, allowing it to continue its business operations and avoid liquidation.


Fifth: How to Utilize Legal Frameworks for Debt Relief 

1. Consult Legal Experts: Individuals and businesses can benefit from bankruptcy and personal insolvency laws by consulting a legal advisor to ensure the process is conducted correctly.
2. Negotiate with Creditors: In some cases, negotiating directly with creditors can lead to manageable repayment plans without needing to involve the courts.
3. File for Bankruptcy Protection: In cases of ongoing financial distress, individuals or companies can apply for bankruptcy protection to temporarily halt legal actions and gain a chance to negotiate.

Conclusion

Debt discharge represents a viable legal option for individuals and businesses in the UAE and internationally. Recent UAE laws, such as the Bankruptcy Law No. 9 of 2016 and the Personal Insolvency Law No. 19 of 2019, have empowered individuals and companies to overcome financial challenges in safe and effective ways. International law also provides frameworks for cross-border cooperation, enabling multinational companies to manage their assets and liabilities. Therefore, seeking guidance from legal advisors is always recommended to ensure the best possible outcome during challenging financial situations.

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