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penalty for unpaid debts in dubai UAE

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Individuals and companies may sometimes face financial difficulties that prevent them from fulfilling their outstanding debts.

Today, in our article titled penalty for unpaid debts in dubai, we will delve into the important details surrounding this topic.

Do you need legal consultation dubai regarding the Penalty for Unpaid Debts in Dubai? Click here to contact our law firm.

penalty for unpaid debts in dubai

In Dubai, as in many other jurisdictions, there are penalties for unpaid debts. When a person fails to repay their debts, they may face legal consequences.

Here are some key points to understand about the penalty for unpaid debts in Dubai:

  • Legal Framework: The penalty for unpaid debts is governed by the UAE federal law No. 18 of 1993, also known as the UAE Commercial Transactions Law.
  • Criminalization of Bounced Cheques: One common scenario for unpaid debts in Dubai is when a post-dated cheque issued as a guarantee for a debt bounces due to insufficient funds. Under UAE law, bouncing a cheque is a criminal offense, and the person responsible may face imprisonment and/or fines.
  • Civil Actions: Apart from criminal penalties, creditors can also pursue civil actions to recover unpaid debts. This may involve filing a lawsuit in the Dubai courts to obtain a judgment against the debtor. Once a judgment is obtained, various enforcement measures can be taken, such as freezing bank accounts, seizing assets, or garnishing wages.
  • Debt Settlement and Negotiation: It is advisable for debtors facing difficulties in repaying their debts to proactively engage with their creditors. In some cases, creditors may be willing to negotiate new payment terms or consider debt settlement options to avoid legal proceedings.

the new law for debt in UAE

There is a new law for loan defaulters in uae 2023 in Decision No. 4 of 2023, the General Authority of the Court of Cassation issued a decision regarding the application of Article 319 of the Civil Procedure Law.

The Authority concluded that it is necessary to prove the debtor’s evasion or concealment of their funds, or the cessation of debt installments. before issuing a decision to imprison the debtor.

The Authority emphasizes the need for a brief investigation to prove the creditor’s claim of the debtor’s evasion or concealment of their funds. or that the debtor has ceased to pay installments without justification. before issuing a procedural decision by the execution judge to apprehend the debtor.

Types of unpaid debts

The most common examples of debts that cannot be discharged vary slightly among different chapters, but generally include:

  1. Alimony and child support payments.
  2. Certain types of unpaid taxes, such as tax liens, can be discharged. However, if certain federal, state, or local taxes are from several years ago, they may also be eligible for discharge.
  3. Debts resulting from willful and malicious injury to another person or their property. “Willful and malicious” refers to deliberate actions without justification.
  4. Debts resulting from the death or personal injury caused by the debtor’s operating a motor vehicle while under the influence of alcohol or impaired by other substances.
  5. Debts that were not included in your bankruptcy filing.

Types of unpaid debts

Debt collection mechanisms in Dubai

Debt collection in the United Arab Emirates typically involves several stages and can be time-consuming and complex.

Here is an overview of the rules for debt collection in UAE:

  1. Initial contact:
    The creditor contacts the debtor to request payment of the debt, which can be done through phone, email, or written communication.
    The creditor may also send a demand letter specifying the amount due, the due date, and any applicable interest or penalties.
  1. Negotiation:
    If the debtor is willing to negotiate, the creditor and debtor can reach a repayment plan or settlement agreement. This may involve negotiating a reduction in the amount owed or extending payment terms.
  1. Legal proceedings:
    If the debtor is unwilling or unable to repay, the creditor may file a lawsuit in the appropriate court. The court will review the evidence presented by both parties and issue a judgment.
  2. Execution:
    If a judgment is issued in favor of the creditor by the court, the creditor may seek to enforce the judgment by seizing the debtor’s assets or bank accounts.
    The court may also issue an order instructing the debtor’s employer to deduct a portion of their salary to repay the debt.


Here are answers to some of the most important questions regarding the penalty for unpaid debts in Dubai:

Failure to repay a bank loan is not considered a criminal offense in the UAE. However, the bank has the right to initiate a civil case to recover the outstanding amount. If the borrower issues a bounced check, it is regarded as a criminal offense, which can result in imprisonment for a maximum of three years or a fine of up to 30,000 dirhams.

if you don't pay debt in Dubai you will not be able to renew your visa before paying the fine. Additionally, the bank will not provide you with a clearance certificate until the check amount is settled.

In Dubai, the statute of limitations for pursuing a debt is generally three years.

In our article titled penalty for unpaid debts in dubai , we discussed the new law for debt in the UAE and provided many important details on the topic.

From the office of Younis Mohammed Al Balushi, we hope that we have provided you with all the information you need regarding the subject of our article.

You can also see: Best criminal lawyers in abu dhabi, and how to find law firms in abu dhabi.

بقلم المستشار القانوني

Legal Consultant in the office of Younis Mohammed Al Balushi. A legal Consultant with a degree in law and has many legal research and articles that have been published in the most important international fields concerned with legal affairs. Such as: - Journal of the seminar for legal studies. - International Legal Journal. - Journal of Political Science and Law. He also has several case studies and cases in different disciplines: international law, criminal law, civil transaction law, commercial transaction law, and so on.The legal advisor at Younis Mohammed Al Balushi Advocates and Legal Consultants has many years of experience and a long experience in pleading before the Dubai Courts and the various courts of the United Arab Emirates.

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