Insolvency comes about when a person (who is not qualified as a Trader) is no longer able to pay his debts due to debt defaults or bankruptcy. This is often referred to as the “Insolvency of the natural person.”
Settling one’s debt.
Under the Insolvency Law, the Debtor needs to attend court. Here, he places a request with the court to be allowed to settle his financial obligations with his creditors amicably and with no litigation proceedings. If the court finds the debtor to be insolvent (which would comply with the new law) the application is legible for approval.
Documents needed to proceed with a financial settlement request.
If the Debtor is successful in the above application some documentation will be needed, namely:
- A statement with the details of the current (and expected) creditors of the debtor. Usually, the names and addresses of the creditors along with the amount of each debt will suffice.
- A memorandum that will give a good overview of the debtor’s current financial position. In the document, it must highlight things such as:
- The debtor’s sources of income both locally and abroad
- The liquidity projections of the debtor within 12 months of the application being made
- The debtor`s professional status at the time of the application.
- A concise statement listing all the debtor’s movable and immovable assets and their approximate value at the time of the application.
- A statement highlighting any legal, judicial proceedings or actions that may have been taken against the debtor.
- A statement from the debtor acknowledging that he is in a financial dilemma. Additionally, he must also state that he was not able to pay his current (and possibly future) financial obligations.
- An outline of the money needed by the debtor for this day-to-day expenses such as the upkeep of his family.
- The proposal from the debtor showing how he intends to clear his debts.
- Providing a statement showing all external financial transfers sent outside the country within the last 12 months.
At this point, the court can appoint an expert who will oversee the proceedings of the financial obligation settlement. The expert will make sure that all remains within the boundaries of the Law.
Failure to produce the required documents.
If the debtor cannot provide the above documents he has to state reasons why he has not been able to do so. If these reasons are good enough the court may award the Debtor more time to gather more information.
Once enough documents have been submitted the court will take no longer than five working days to make its decision.
Can the court reject the request for a settlement of financial obligations?
The court can refuse to request from the debtor in cases where
- The debtor falsifies information
- The court feels the debtor is hiding data that may incriminate him in some way.
The job of the appointed Expert
The court-appointed expert will work with the debtor to create a feasible payment plan. Copies of the plan will be sent to all of the creditors and finally to the court within 22 working days from the day the expert-created the plan. Extensions to this time can be awarded by the court when deemed necessary.
Within 10 working days of sending the plans to the creditors, the expert will set up meetings between the Debtor and each of these creditors. The time and place for these meetings will be set by experts with the aim being to discuss and agree on acceptable plans.
Can revisions be made to the final settlement plan?
Once all the creditors have agreed on their respective plans it is still possible for amends to be made if the expert presents these amendments to the court. If the court agrees to all or part of the changes it will notify all creditors of the approved changes.
Closing insolvency and liquidation proceedings.
When the debtor pays all the outstanding payments to his creditors as agreed in the plan the court shall issue a statement signaling the closing of all liquidation procedures. This document will be the names of all the creditors along with the amounts paid. The statement will also be published in two local daily newspapers with one version in English and the other in Arabic.
Consequences of doing a settlement.
- The debtor cannot obtain any form of a loan or financial assistance for a period of 3 years from declaring insolvency.
- The debtor`s name will go onto a Special Register stating that the debtor was sentenced to insolvency.
- The debtor is prohibited from entering into financial ventures paid or otherwise unless it is something that is supporting their dependents. This will last for a period of three years from the date insolvency was issued and their assets liquidated.