What is the punishment for not paying back a loan in the UAE
Anyone can run into financial problems. While it can be a really challenging time, it is always wise to ensure you adhere to the laws and regulations outlined by the government. For instance, what is the punishment for not paying back a loan in the UAE is a commonly asked questions. Similarly, opting for a mortgage, people also often wonder what happens if you don’t pay off your property debt in the UAE. Here, we answer these questions and look at the relatively recent change in the law.
LIABILITY FOR THE UNPAID LOAN IN THE UAE
Loans are at times necessary to buy assets for both businesses and individuals. Whether you need it for a personal expense/asset or to invest in buying assets for your company, there is always a chance that things may not go as planned. Hence, the question, can I go to jail for not paying a personal loan in the UAE or a business loan, is a pertinent one.
The answer to this question previously was yes, you potentially could end up in behind bars. However, a landmark judgement by the Court of Cassation means this is no longer the case. Business owners or individuals who fail to meet their loan payments will not face the risk of arrest. Similarly, personal guarantors will not be charged with criminal code if the person they provided guarantee for is unable to pay their loan back.
Arrests, however, can be made if it is proven that the funds have been smuggled or have been hidden. The consequences are similar for cases where the instalments have stopped entirely, or the creditor can prove that the debtor has sufficient wealth to make the payments but refuses to do so. In such cases, the court will conduct a brief investigation to ensure the debtor does really have those funds.
As per reports, this ruling only applies to cases involving family and labour disputes, real estate and commercial cases. When it comes to criminal offences, there has been no change in regulations.
WHAT CONSTITUTES INABILITY TO PAY LEGALLY IN THE UAE?
As per the latest ruling by the court, insolvency or an inability to repay the loan is to be presumed unless proven otherwise by the creditors. They need to provide evidence that confirms that the debtor has the funds to repay the amount. If the court’s investigations finds that debtors has smuggled or concealed their assets, the debt’s claim of inability to pay back the loan is denied and the person will have to face the legal consequences.
PUNISHMENT FOR NOT PAYING BACK A LOAN IN THE UAE AS PER NEW RULES
As discussed, these new rules mean that the creditor can plead the case in front of a court and a custodial sanction may be possible. However, it is up to the court to evaluate the debtor’s financial position and the subsequent punishment. In case of the liability for the unpaid loan, unless it is proven that the debtor is wilfully not paying instalments despite having the money, a jail sentence is not warranted.
WHAT OTHER CONSEQUENCES ONE MAY FACE OTHER THAN ARREST?
There are however, other possible punishments that you may end up facing.
FINANCIAL PENALTY
Creditors can seek to have financial penalties imposed on you via a court for failing to pay your debt.
TRAVEL BAN
What is the punishment for not paying back a loan in the UAE? Well, here is a significant one. You may end up with a travel ban and the authorities will ensure you cannot leave the UAE without paying your debt.
FAQS
CAN A BOUNCED CHEQUE LEAD TO A CRIMINAL CASE IN THE UAE?
No, barring a few noted exceptions, bounced cheque cases have been decriminalised. However, one may face financial penalties and be liable for civil claims.
WHERE CAN I LEARN ABOUT MORTGAGES IN THE UAE?
Go through our list of FAQs about mortgages to learn all you need to know.
WHAT IS THE NEW INSOLVENCY LAW IN THE UAE?
Go through our explainer of the insolvency law in the UAE to find out everything you need to know.
So, now you know the answer to the question of what is the punishment for not paying back a loan in the UAE.
If you are still wondering, “Can I go to jail for not paying a personal loan in the UAE?” The answer is yes – it is possible but only in certain circumstances. The rules regarding liability for the unpaid loan and defaulting on a loan have been changed by the government to protect the rights of both the creditors and debtors.
