The UAE’s Personal Insolvency Law allows debtors to file insolvency proceedings before the court, which, after approval, will provide them with legal protection and ensure the scheduled settlement of all financial obligations.
The UAE introduced insolvency law in 2019 by enacting Federal Law No. 19 of 2019, and the law is effective from 29 November 2019, hereinafter referred to as “Insolvency Law. The primary focus of current insolvency law is therefore to give debtors the opportunity to legally repay their debts via a settlement plan.
The term “insolvency” is frequently confused with the term “bankruptcy,” although the two are different. Insolvency law applies only to natural persons, whereas bankruptcy law applies to commercial companies and traders. Bankruptcy cases fall within the jurisdiction of Federal Act No. 9 of 2016.
In accordance with Article 3 of the Law:
Article 3- Submission of the Application the Debtor may file with the Court, an application without litigating any person therein, to settle his financial obligations in accordance with the provisions of this Decree-Law, provided that the following documents are attached thereto:
If the application submitted by the debtor fulfils all the above conditions, the court shall decide within 5 days of submission of the application without the requirement of further pleading or notice.
If the Court accepts the application of the Debtor for the settlement of his financial obligations, then immediately all the rights of the creditor are suspended towards proceeding with execution against the Debtor’s funds or initiating liquidation proceedings against the Debtor. Stay of execution proceedings against the Debtor will continue in force during the settlement period approved by the Court, unless the Debtor has committed breach of his obligations as determined by the approved plan. An expert will be usually appointed by the Court and the appointed Expert will continue to act as a supervisor of the Plan throughout the duration of the implementation period.
In the instance the Court rejects the application of the Debtor, then the Debtor has the option to challenge the decision before the Appeal’s Court, however, the decision issued in appeal will be considered final.