Insolvency Law in the UAE

The Federal Decree-Law No. 19 of 2019 on Insolvency shields debtors from legal action, decriminalizes the debtor’s financial obligations, and allows them the chance to work, be productive, and support their families.

The Federal Decree-Law No. 19 of 2019 on Insolvency, which governs cases of insolvency of natural persons, was adopted by the UAE Cabinet. This law intends to increase the competitiveness of the UAE by guaranteeing ease of doing business, creating favorable conditions for people who are experiencing financial difficulties, and safeguarding those who are unable to pay their debts due of bankruptcy. The primary rules of the law are as follows:

  • The law intends to support individuals who are facing existing or anticipated financial difficulties that make them unable to settle their debts
  • The law will help individuals reschedule their debts and give them the opportunity to take new concessional loans
  • The new law will protect the debtors from legal prosecution, decriminalize the financial obligations of the insolvent person and give them an opportunity to work, be productive and provide for their families
  • One or more experts will be appointed by the court to settle the financial obligations debtor. The expert will coordinate with the debtor and creditor to come up with a plan to settle the financial liabilities within three years.

What is the difference between Insolvency and Bankruptcy?

‘Article (8) of the Insolvency Law Dubai,’ governs the legislations pertaining to cases of individuals with financial difficulties. This includes cases where people are unable to repay debts such as credit card bills or loans in the UAE. This new UAE law should not be confused with the UAE bankruptcy law.

The existing bankruptcy law in the UAE deal specifically with businesses and companies in the UAE. The insolvency law, on the other hand, caters to individual debtors.

What does the insolvency law offer and what is an insolvent person?

A person who anticipates or is currently experiencing financial difficulties that prevent him from being able to pay his bills is said to be insolvent.

The insolvency law covers two critical paths and processes for those experiencing financial troubles. The first option involves a person asking the court for help settling debts. The second option requires liquidation proceedings due to a person’s persistent inability to pay debts.

The Law establishes a set procedure with deadlines for each route.

How will debt relief in the UAE be aided by the new insolvency law?

Previously, individuals who were unable to repay their debt in the UAE were faced with disciplinary measures, which included a possible travel ban and even imprisonment. The new UAE federal law for insolvency has replaced this with a more lenient approach that allows defaulters in the UAE to efficiently manage their outstanding finances.

Here are some of the amendments to the law that will help individuals with debt relief in the UAE.

  • Legal support for individuals who have existing debt or anticipate increasing financial difficulties in the near future
  • Place debtors in the UAE on a three-year settlement plan with the help of experts to assist with debt pay off
  • Protect debtors from legal prosecution by presenting them with opportunities to work and be productive. This will allow them to provide for their families, especially in cases where the debtor is the sole earning individual in the family
  • Prevent debtors from taking any further loans unless the court decides otherwise

Residents and legal professionals praised these changes to the UAE debt law for their beneficial effects on society. In Dubai, Emiratis and expatriates who cannot pay their credit card bills or unpaid loans no longer need to worry about being imprisoned. Now that the UAE government is behind them, these people can keep working to pay off their debt (s).

Debt Settlement Modes under the new UAE Debt Law

This new UAE federal debt law will offer two mechanisms to resolve the financial insolvency of individuals – a plan for settling financial obligations or through insolvency and liquidation of funds. 

1. Settling financial obligations

Depending on the debtors’ circumstances, the court will appoint one or more specialists to help the debtors during these processes and create a settlement strategy for the debts. The creditors will vote on a plan and carry it out if one has been chosen.

The court has the right to deny or decide to discontinue the process of settlement of obligations if:

  • The debtor refrains from or commits an action to deliberately damage or conceal any or part of their property.
  • The debtor submits false statements about debts, funds or rights of the debtor.
  • There is non-payment of debts for over 40 consecutive working days after maturity due to financial inability. The debtor, in this case, can apply for insolvency

2. Insolvency and Liquidation of Funds

The second strategy used in the UAE to combat insolvency is the sale of assets to raise money to pay off debt. This approach is appropriate when a debtor’s inability to make payments for more than 50 consecutive working days after the due date is caused by financial difficulties.

When a debtor chooses liquidation, the court appoints a trustee to oversee and arrange the sale of the bankrupt’s assets and funds. This appointment has been made in compliance with the guidelines of Article (8) of the new debt law.

Creditors may also ask for the liquidation of the debtor’s assets under certain conditions, provided that the liquidation sum does not exceed AED 200k.

This new federal debt law in the UAE will provide two avenues for financially insolvent people. They will accomplish this by presenting a strategy for paying off debts, declaring bankruptcy, and liquidating assets.


The Law imposes fines (ranging from AED 10,000 to AED 100,000) or criminal penalties on creditors who engage in certain behaviors. That is, engaging in fraudulent acts to increase their debt, voting on the settlement plan while aware that they are ineligible to do so, or entering into an agreement with the debtor after the start of the liquidation proceedings to gain particular privileges at the expense of the interests of other creditors.

The Law also establishes additional consequences for debtors who engage in specific actions that cause losses to their creditors, including fines (ranging from AED20,000 to AED60,000) or criminal penalties (imprisonment for a term not to exceed two years).

Marwa Al Reyami Lawyers and Legal Consultants has a specialized team dedicated to provide legal advice and assistance in light of the Insolvency Law.