What legal action can the bank take in the UAE in case of loan default due to job loss? - Q&A - Legal Advice Middle East

Question

Q: My friend has a loan of AED 300,000 with a security cheque of 500k and lost his job 12 months ago. What legal action can the bank take in the UAE in case of loan default due to job loss? A: First, we submit a request to the bank for a settlement and obtain a better installment plan…

سهيل رنا · Accepted Answer

I understand the urgency and the stress your friend is facing. Here’s a clear picture of how matters usually unfold in situations like this and the practical steps we can take right away. The bank’s immediate leverage lies in the loan agreement and whatever security cheque or pledge they are holding. If a cheque is supplied, the bank can deposit it at any time; if it bounces, the matter turns criminal, and a police case can open almost immediately. That can lead to a travel ban or even detention once a public-prosecution file is created, so we must treat the 13-day deadline seriously. Civilly, the bank can file a payment claim and seek attachment of salary (once your friend secures a new job), bank accounts, or movable assets. Because he has already missed several instalments, the bank will be keen to show “default” and accelerate the entire outstanding balance. If a criminal cheque case starts, they often run both tracks—civil and criminal—in parallel to maximize pressure. There are, however, workable protections: Restructuring or settlement: Banks do restructure loans when they see a realistic repayment path. A tailored proposal that shows how your friend will resume payments once employed can pause escalation, especially if we offer a modest goodwill payment now and a revised schedule back-loaded to stable income. Mediation channels: Certain lenders route defaulted cases through internal “hardship” or mediation departments before court. Engaging them formally, with legal representation, often buys crucial breathing space and can keep the cheque from being presented. Personal insolvency/bankruptcy route: The UAE has a debtor-friendly procedure that lets individuals in genuine financial distress propose a court-supervised repayment plan, freezing legal actions and protecting them from detention. It is not a step to take lightly, but it is a viable safety net if negotiations stall. Immediate safeguards: We should notify the bank in writing that your friend is actively seeking work, request a temporary moratorium, and table a restructuring plan within a short, fixed time. Done correctly and on firm legal footing, this written engagement can help fend off rash criminal filings. The next move should be swift: gather the loan documents, any correspondence from the bank, and the security cheque details. I can then open dialogue with the bank’s recovery team, position a restructuring offer, and, if needed, prepare the bankruptcy filing as a contingency so we are not caught off guard. Let’s discuss the specifics and craft a response before the 13-day window expires. Reach me directly on WhatsApp or phone so we can act without delay.

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