How can you reach a settlement to avoid legal action by the bank if you lose job and can not repay your loan?

Dear Mohammed,

We understand your brother's difficult financial situation, and we’re here to provide professional legal support.

When an individual in the UAE is unable to repay bank debt, especially due to job loss, there are several possible legal and practical steps to consider that may help avoid legal restrictions such as travel bans, arrest warrants, or civil cases.

One option is to request a restructuring of his loan, which involves negotiating with the bank to reduce the monthly installment amount, extend the loan repayment period, lower the interest rate temporarily, or offer a grace period.

This is often possible if your brother reaches out to the bank before the matter escalates legally. Banks in the UAE generally consider restructuring if they see that the customer is making efforts to repay.

Another option is to approach the UAE Central Bank's consumer protection platform, Sanadak. This service can mediate disputes between banks and customers and may assist in reaching a settlement with the bank.

You can access Sanadak through this official link.

In cases where the borrower is truly unable to repay the debt, he may apply for legal protection under the UAE Insolvency Law (Federal Decree-Law No. 19 of 2019).

This law protects individuals from criminal prosecution related to bounced cheques or non-payment, freezes all legal actions and collections for up to 12 months, and allows the court to supervise a settlement or restructuring plan.

If his income is insufficient, part of the debt may be written off. We can fully assist in filing the necessary paperwork and presenting the case before the court.

If the bank has already taken legal steps, such as filing a case for bounced cheques or non-payment, there is a risk of a travel ban, arrest warrant, or civil execution.

To prevent this, it is essential to take quick action, either through negotiation or by filing under the Insolvency Law.

We recommend reviewing his loan documents and any legal notifications to assess his position. Once we have these, we can contact the bank on his behalf or proceed with court protection under the law.

Please send us a copy of the loan agreement, any bank communications, and any court or police documents if available.

You may email the documents to us by email. We will work closely with your brother to resolve the issue with minimal risk and secure the best possible outcome.

According to UAE law, your brother can request a friendly settlement or restructure the loan with the bank based on his current financial situation, to avoid legal actions such as a travel ban or imprisonment.

In certain cases, he may also apply for insolvency if he is genuinely unable to repay the debt.

Hello,

I hope you are doing well.

We understand that your brother has been unemployed for 8 months and is struggling to repay a bank loan of AED 170,000.

Being in such a situation is understandably overwhelming, especially with the fear of legal consequences like travel bans or court action.

There are a few legal and financial solutions available, such as:

Negotiating a debt restructuring or reduced settlement directly with the bank.

Exploring the option of a court-approved payment plan under the UAE’s Federal Bankruptcy Law, which can protect him from travel bans or legal cases while repayments are being organized.

In some cases, he may also apply for financial hardship consideration to delay or reduce payments temporarily.

We understand your situation and can help you explore the most practical and stress-free solution based on your current financial position.

We recommend booking a consultation with one of our lawyers to assess the best option. We also offer a 15-minute free online consultation to understand his case better and offer guidance.

To book, please contact us by phone or email.

From the information you have given, it will be better if we negotiate with them.

Your brother needs to proactively reach out to the bank and explain his situation honestly and transparently.

He should provide evidence of his job loss and ongoing unemployment. He can ask the bank to restructure the loan to make the monthly installments more manageable, like reducing the monthly payment, lowering the interest rate, and so on.

If you want, we can undertake the negotiation procedures on his behalf. Kindly confirm in order to proceed.

Dear questioner

We need to negotiate with the bank for a good offer to close the loan, either a one-time settlement or with monthly payments which is affordable.

If you need our assistance, kindly let us know, and we can reach out to you shortly.

Dear Client,

If your brother is facing difficulty repaying a debt of AED 170,000 due to unemployment and wishes to avoid restrictions such as a travel ban, there are several options available to help him manage, reduce, or settle the debt.

Here is a professional guide to address his financial situation:

1. Proactively Engage with the Bank

Your brother must contact the bank directly and explain his financial circumstances. Banks in the UAE often provide solutions for borrowers facing financial hardship, including:

- Restructuring the Loan: He can request an extension of the loan tenure, which will reduce monthly payments.

- Payment Deferral: Banks may allow temporary deferment of payments (usually up to 3-6 months) for unemployed individuals.

- Debt Settlement Offers: He can negotiate a one-time settlement where the bank agrees to accept a reduced lump-sum payment in exchange for closing the loan entirely. Settlement discounts can range from 30% to 60%, depending on the bank's policies.

Providing evidence of unemployment, such as termination letters or proof of job applications, will strengthen his case during negotiations.

2. Explore Debt Management or Relief Programs

Some banks offer tailored debt management programs for individuals struggling with repayments. These programs may include:

- Reduced interest rates.

- Waivers on late payment penalties.

- Consolidation of debts into a single loan with easier repayment terms.

Additionally, the UAE Central Bank has introduced initiatives to assist borrowers in financial distress. While these programs are primarily for UAE nationals, expatriates may also benefit on a case-by-case basis.

3. Prevent Legal Action and Travel Bans

If legal action has not yet been initiated by the bank, it is essential to act quickly:

- Partial Payments: Making small payments, even if irregular, demonstrates goodwill and reduces the likelihood of legal escalation.

- Negotiation with Legal Support: If legal action is imminent or already underway, hiring a lawyer or debt negotiation expert can help resolve disputes and prevent travel bans or other restrictions.

If a travel ban has already been imposed, settling the debt (or negotiating terms) will result in its removal.

4. Seek Professional Legal Assistance

If negotiations with the bank prove difficult or legal proceedings have commenced:

- Engage a qualified lawyer experienced in UAE debt laws to mediate between your brother and the bank.

- A lawyer can help negotiate favorable repayment terms or settlements and ensure compliance with UAE legal requirements.

- Legal experts can also assist in filing disputes or motions to delay enforcement actions like travel bans or asset seizures.

5. Practical Steps for Financial Recovery

While addressing the debt issue, your brother should also focus on improving his financial situation:

- Job Search: Actively pursue employment opportunities in the UAE or abroad.

- Family Support: If possible, seek temporary financial assistance from family members to make partial payments and ease negotiations with the bank.

- Budgeting: Prioritize essential expenses while setting aside funds for minimum payments.

Our Services

We offer professional assistance tailored to your brother’s situation:

1. Debt Negotiation: We can engage directly with the bank on his behalf to secure favorable repayment terms or settlement offers.

2. Legal Representation: If legal action has been initiated by the bank, we provide expert representation to protect their rights and minimize risks such as travel bans or imprisonment.

3. Documentation Support: We ensure all agreements with the bank are legally binding and properly documented.

4. Case Management: Continuous follow-up with relevant parties ensures the timely resolution of his debt issue.

Next Steps

To proceed, we recommend:

1. Collecting all relevant documents (loan agreement, payment history, correspondence with the bank).

2. Scheduling a consultation with our team to assess his case and develop a tailored strategy.

Our experienced professionals are committed to helping your brother resolve his debt efficiently while minimizing legal risks and restrictions. Please feel free to contact us for further assistance.

We look forward to assisting him in finding an effective solution.

Best regards

Abdul Wahied