Loan Advance Debt Collection: How It Works

Whether you are an individual who lent money to someone else, or a company with outstanding receivables from its clients, UAE law provides more than one route to collect a debt, depending on the nature of the debt and the evidence available. Federal Law No. 5 of 1985 on Civil Transactions governs the legal relationship between creditor and debtor, while Federal Decree-Law No. 42 of 2022 on Civil Procedures governs collection mechanisms, most notably the fast-track payment order system for debts evidenced in writing, and the enforcement procedures that follow a judgment. Debts evidenced by cheques are subject to special rules under Federal Decree-Law No. 50 of 2022 on Commercial Transactions, which gives a bounced cheque the force of an enforceable instrument directly, without the need to file a lawsuit. At AWADH ALMHEIRI LAW FIRM AND LEGAL CONSULTATIONS, this guide explains all the routes for collecting advances, loans, and debts in the UAE, whether between individuals or for companies.

Federal Law No. 5 of 1985 on Civil Transactions governs the legal relationship between creditor and debtor and the conditions for the creation and extinction of a financial obligation. The mechanisms for claiming and actually collecting the debt are governed by Federal Decree-Law No. 42 of 2022 on Civil Procedures, which sets out a special, fast-track system known as the payment order for debts evidenced in writing, alongside the usual procedures for filing a lawsuit and enforcing judgments. Debts evidenced by cheques are subject to special rules under Federal Decree-Law No. 50 of 2022 on Commercial Transactions.

Before going to court, it is advisable to send a formal legal notice to the debtor, stating the details of the debt, its due date, and a specific deadline for payment, whether the debt is between two individuals or owed to a company by its clients. In addition to offering a final opportunity for amicable settlement without court costs, this notice later serves as important evidence if payment is not made and the matter proceeds to legal action.

Under Federal Decree-Law No. 50 of 2022 on Commercial Transactions, a bounced cheque on which the bank has certified insufficient funds now has the force of an enforceable instrument in itself, meaning the holder can go directly to the execution judge to recover its value, without needing to file a traditional lawsuit through the usual litigation stages, and without first requiring a criminal report. Obtaining a bank certificate confirming the cheque was dishonoured, wholly or in part, is sufficient to begin enforcement proceedings.

If the debt is not sufficiently evidenced in writing, or its amount or cause is disputed, a payment order is not suitable, and an ordinary lawsuit must instead be filed before the competent civil or commercial court, in which the creditor presents all available evidence to prove the debt, leading to a court judgment that serves as an enforceable instrument.

AWADH ALMHEIRI LAW FIRM AND LEGAL CONSULTATIONS is a licensed UAE law firm specialising in debt, advance, and loan collection for individuals and companies, before the payment order judiciary, ordinary courts, and execution departments in Dubai and across all emirates of the country. We assess your debt and choose the fastest and most suitable route to collect it.

Whether the debt is owed between two individuals, or your company is seeking to collect multiple receivables from its clients, our team follows your file from the first notice through to actual enforcement and recovery of the amount.

AWADH ALMHEIRI LAW FIRM AND LEGAL CONSULTATIONS provides its services across the Emirate of Dubai, covering the collection of debts, advances, loans, and dishonoured cheques for individuals and companies before the courts of Dubai and the execution departments.

The firm also provides legal services in Abu Dhabi, Sharjah, Ajman, Ras Al Khaimah, Fujairah, and Umm Al Quwain, covering all debt collection cases before the courts of each emirate.