What Creditors Must Know About UAE Insolvency Law Before Filing a Debt Claim

10 July
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As a creditor in the UAE - whether you are suffering unpaid invoices, a bounced cheque, or even a business that has silenced - you need to know how insolvency laws in the UAE operate since it may have a huge impact on how you recover your debt. The introduction of the insolvency framework by the UAE in 2016 with Federal Decree Law No. 9 of 2016, as well as the amendments in 2020, has changed the rules of the game Creditors who don’t adapt to the current laws often end up with nothing but unpaid invoices and a frustrating tangle of legal dead ends.

Let’s make this simple for you, so you know exactly what you are dealing with when the debtors start to head toward insolvency-

What Exactly Is the UAE Insolvency Law?

In simplistic terms, the UAE insolvency Law presents a structured method through which financially troubled corporations (or individuals) may have their debts restructured or undergo liquidation. It serves to provide desperate debtors with an opportunity to recover and save creditor rights all at once.

This law is primarily focused on companies registered in the UAE (excluding DIFC and ADGM jurisdictions, which follow separate frameworks). It lays out how debtors can file for preventative composition (a sort of early restructuring plan), restructuring, or formal bankruptcy- depending on how deep their financial trouble is.

If you're a creditor, trying to do debt collection in Dubai, this law defines what you can expect, how soon you need to act, and what your chances are of getting paid.

Here’s What Creditors Need to Know (Before You File Anything)

Whether you’re a supplier, service provider, or investor, jumping into the legal process without a proper grip on the law is risky. Here’s what should be on your radar:

1. Priority Matters

Not all creditors are equal in insolvency proceedings. Secured creditors (those with collateral or legal rights over the debtor’s assets) usually get paid first, followed by employees, then unsecured creditors.

So, if you’ve lent money or extended credit without any formal security or contract protections, you may be last in line during liquidation. Knowing where you stand in that pecking order is key.

2. Timelines Are Tight

Under Article 68 of the 2016 Insolvency Law, once a court approves bankruptcy proceedings, creditors have 20 working days to submit their claims to the appointed trustee. Miss that window, and your claim might be ignored altogether.

This is where working with an experienced Dubai debt collection agency can help you stay on top of deadlines and file the correct documents on time.

3. Proof Is Everything

Just saying someone owes you money won’t cut it. You need detailed proof: signed contracts, invoices, delivery records, bounced cheques, communication logs, whatever builds a solid case.

A vague claim or missing paperwork weakens your chances, and in court-supervised insolvency cases, weak claims are usually dismissed outright.

4. Preventative Composition vs. Bankruptcy

There’s a big difference between preventative composition and full-blown bankruptcy. A company can request a preventative composition if it expects financial trouble but isn’t deep into default yet.

Creditors should know: in this stage, debtors get breathing room, and creditors can’t file claims to force payments. But you do get a vote when the restructuring plan is proposed, and your vote carries weight based on how much is owed.

This is one of the rare moments where creditors can influence how and when they'll get paid.

Common Pitfalls Creditors Should Avoid

Creditors often hurt their own chances without realizing it. Here are a few real-world mistakes we’ve seen time and again:

Waiting too long to act: Hoping that the client will “come around” or that payment will arrive next month delays your ability to take legal steps.
Relying only on polite reminders: Courts and trustees respond to documented claims and formal notices- not emails chasing payments.
Not updating contact info: If the trustee can't reach you during insolvency proceedings, your claim might fall through the cracks.

Even if you are already working with a debt collection agency in UAE, make sure they are familiar with insolvency procedures and court processes- not just negotiation and follow-ups.

The Role of the Court-Appointed Trustee

During bankruptcy, the court assigns a trustee to manage the debtor’s assets and liabilities. This person evaluates all creditor claims, liquidates assets, and distributes funds as per legal priorities.

Creditors can request updates, contest decisions, or even appeal the trustee’s actions. But you need to be proactive and informed- not just sitting back and waiting for a payout.

If your debt Dubai claim is not properly filed or backed with strong evidence, the trustee has every right to reject it. That’s why having skilled debt collectors in Dubai handle the paperwork can mean the difference between recovering your money- or writing it off entirely.

A Quick Look at Individual Insolvency (Not Just Companies)

A 2020 amendment to the UAE law introduced a separate framework for individual insolvency. So if you’re dealing with unpaid personal loans, service bills, or guarantees by individuals, you have a route to file claims.

Still, many of the same rules apply: documented claims, clear deadlines, and court involvement. It’s not as simple as calling the person and asking for repayment.

Liquidation Doesn’t Always Mean Payment

One of the hard truths is that even if the debtor’s assets are sold off in liquidation, there’s no guarantee you’ll get your full amount- especially if you are an unsecured creditor.

Recovery amounts depend on how much the assets fetch, how many other creditors are in line, and how well your claim holds up. In some cases, creditors recover pennies on the dirham.

That’s why it’s often smarter to seek early resolution, restructure the debt, or negotiate settlements before a case even reaches court. The longer you wait, the harder it gets.

Conclusion

The UAE’s insolvency framework is more creditor-friendly than it used to be, but it still demands vigilance, timing, and strategy. If you’re dealing with debt collection Dubai cases, especially involving financially unstable companies or individuals, knowing your legal rights under the Insolvency Law can help you recover more, faster.

And while it’s possible to navigate this alone, having experienced professionals on your side can save you time and protect your claim. At Alqada Claim Recovery Services, we’ve handled everything from simple debt Dubai settlements to full-scale insolvency claims.

Need Support Filing a Claim?

If you suspect a debtor is heading for bankruptcy- or if you've received a court notice about an insolvency case- don’t wait and guess. Talk to the legal team at Alqada Claim Recovery Services. We’re here to help you build a strong case, file on time, and recover what you’re owed.

Let’s turn that unpaid invoice into real results. Reach out now.

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