The experience of dealing with overwhelming debts can be worrisome and therefore challenging. In the UAE there exist recognized legal avenues which allow the individuals or the business entities to seek for legal remedies as pertains to debt relief. There are two fundamental forms of debt relief, which are bankruptcy, and debt settlement. As indicated in both methods it helps to start afresh and relieve one from the financial woes.
Insolvency/Bankruptcy in the UAE
Default meaning the failure to pay an obligation as and when due either by a firm or an individual due to insolvency. The UAE has new laws on bankruptcy that were passed in 2019 which aimed to protect debtors from prosecution and have hopes of re-profiling their debts. All these laws affect persons as well as ‘companies’. It often involves seeking the court’s permission to be given a bankruptcy order in which a given debtor’s belongings are taken and sold in order to clear unpaid debts.
In the bankruptcy processes, the court may order for the appointment of a trustee who will take charge of the debtor’s property and financial obligations. Some of the responsibilities of the trustee consist in managing the process of the realisation of assets, the distribution of the proceeds to the creditors as well as supervision of the legal processes. On this basis, for the individuals this might be the sale of assets, while for the businesses it could entail restructuring, or even liquidation.
Debt Settlement
Debt settlement is a legal method that acts as the counterpart of bankruptcy and implies creditors’ cooperation to receive partial payment for the dues. This is advantageous for both the creditor and the debtor because it gives debtors a second chance rather than filing for bankruptcy and give creditors some amount rather than no cents at all. Debt settlement is an agreement that is made whereby a balance of a certain amount that is lesser than a certain amount of money is paid in order to clear due amounts and thus does not require full payment obligations.
In the UAE, the role of debt negotiation is performed with the help of legal or financial consultants who come into contact with the creditors on behalf of the debtor. This option involves the debtor to prove that he is financially distressed and the procedure usually involves the preparation and presentation of a feasible plan of payment. This kind of debt settlement is fruitful in terms of managing the debt as it does not put a severe strain on the debtor and lets them take charge of their financial management without going through a bankruptcy procedure.
Choosing the Right Option
Thus, to decide whether it is better to turn to bankruptcy or seek debt settlement it is necessary to consider certain personal factors of the debtor. For those who find themselves in a financial position where their debts are beyond their capacity to pay, bankruptcy may be their best shot since it is a legal proceeding which, if followed to the letter, results in most of the debts being wiped out. But it has an aftermath which includes affecting one’s credit status and limitation of financial operations in future.
Debt settlement on the other hand may prove relevant for those who in any way can afford to settle at least a portion of the debt and who are willing to go through stigma and legal consequences of bankruptcy. It is relatively more advantageous, especially in that it is more adaptable than the ‘lost-passwords’ approach; it also does not heavily impact credit ratings.
Conclusion
On the one hand, bankruptcy and, on the other, debt settlement are two distinct processes that provide a way out of the difficult financial situation. UAE residents and companies must pay attention to these procedures and, when necessary, consult professionals for help. It is, however, important to note that if a right approach is applied, it is easy to get out of the indebtedness and probably begin a process of recovering and getting a stable financial base.
How to Improve Your Credit Score in the UAE: Tips and Tricks
Credit score is crucial in financial management, including loans one is likely to be granted, to even the interest to be charged on credit cards. It is equally important in the UAE region to have a good credit score more so when dealing with credit. Read on to know about various ways of enhancing your credit score with some helpful strategies.
