Bankruptcy Lawyer in Dubai and the UAE: Conditions and Deadlines

If you have stopped paying your due debts for more than 65 consecutive working days, and your total debt has reached AED 250,000 or more, Federal Decree-Law No. (19) of 2019 on Insolvency gives you the right to file a formal application with the competent court to settle your financial obligations, or to declare your insolvency and liquidate your assets under judicial supervision, without facing criminal prosecution. This law does not apply to traders subject to commercial bankruptcy legislation; it specifically targets natural persons (non-trader individuals) who have been overwhelmed by financial burdens.

âš–What Is Insolvency Under UAE Law?

Article (1) of Federal Decree-Law No. (19) of 2019 defines insolvency as "facing current or expected financial difficulties that render the debtor unable to settle his debts." Under the law, "cessation of payment" means the debtor's inability to pay any debt due for payment.

Insolvency differs fundamentally from commercial bankruptcy. Under Article (2) of the law, its provisions apply only to debtors who are not subject to Federal Decree-Law No. (9) of 2016 on Bankruptcy — meaning the Insolvency Law is dedicated to non-trader individuals, while traders and companies are governed by commercial bankruptcy legislation and, subsequently, the Financial Restructuring and Bankruptcy Law.

🧭The Three Pathways for Handling Insolvency in the UAE

The law organizes three sequential pathways for dealing with a state of insolvency, depending on the circumstances:

📝Conditions and Deadlines for Filing an Insolvency Application

Cabinet Resolution No. (47) of 2021 set the actual values and periods applicable to Articles (28) and (29) of the Insolvency Law as follows:

• The debtor may personally file an application to open insolvency and liquidation proceedings if the total debt reaches AED 250,000 or more, and payment has stopped for more than 65 consecutive working days.
• A creditor, or a group of creditors, owed an amount of no less than AED 1,000,000 may file the application, provided they have formally given the debtor notice and the debtor failed to respond within 65 consecutive working days from the date of notification.

The debtor's application must be accompanied by a memorandum on their financial position, a statement of creditors' names and debt amounts, a detailed statement of movable and immovable assets, a declaration of inability to pay, and settlement proposals (Article 3).

📜Legal Effects of a Declaration of Insolvency

A court order opening insolvency and asset-liquidation proceedings triggers a number of direct legal effects, most notably under Articles (50) to (54) of the law:

• All of the debtor's debts become immediately due, whether ordinary or secured by mortgage or privilege.
• The debtor is barred from managing their business or disposing of their assets without the appointed trustee's approval.
• Statutory or contractual interest on the debtor ceases to accrue.
• The debtor is barred from obtaining a new loan or financing for 3 years from the date of the judgment.
• The debtor is barred from entering into new obligations (whether for consideration or gratuitous) for 3 years, except for the essential needs of the debtor or dependents.
• The debtor's name is recorded in the special register of persons declared insolvent.

🏠Exempt Assets and Protection of the Debtor's Home

The law does not leave the debtor unprotected. Under Article (39), the following do not form part of the debtor's assets subject to liquidation: retirement pension or social welfare benefits, as well as any funds the court determines necessary to meet the essential living needs of the debtor and dependents.

As for the sale of the debtor's home, Article (40) provides that it may only occur upon the trustee's application to the court, and when considering such a request, the court must take into account the interests of the creditors, the availability of an alternative home, the number of family members residing with the debtor, whether the sale proceeds are sufficient to purchase a suitable alternative home, and any other humanitarian or social considerations.

💡Practical Tips Before Filing an Insolvency Application

📚Legal References

❓Frequently Asked Questions

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