The Debt Panel: Dubai aviation sector employee too stressed to eat or sleep over Dh170,000 debts

I work in warehouse and logistics coordination in the aviation industry earning almost Dh9,000. I have seven credit cards, which have been maxed out, and a personal loan. In total my liabilities are Dh170,000. I first moved here from the Philippines in 2011 and brought my family here in 2014. I started taking on credit when I first arrived, applying for a loan to settle a debt in my home country and to cover expenses here. But because of carelessness I started spending heavily on my credit card and took out more cards. I used the new cards to pay the minimum off the other cards. Then some friends borrowed money and promised to pay us back but they never did, so now we have no money to pay off our debts. I have visited my bank to apply for a debt consolidation loan but it was not approved because I have too many cards and my EMI is not meeting the requirements. Bank collectors are chasing me now because I have missed two payments on my cards. I want to negotiate with the banks that issued my credit cards but I do not know how to approach them about the situation I am in. I am afraid they will call the police and send me to jail. I am willing to pay all my debts and want to pay an amount that I can afford according to my earnings. A year ago I paid Dh2,000 to a debt consultant and issued a post-dated cheque for Dh13,000 to be collected once the debt is settled. But until now nothing is resolved. My wife will also begin work on April 1. For the last two months I have been unable to sleep and eat as I am so afraid –I don't have money to buy food for my wife and children. What should I do? JR, Dubai

Debt panellist 1: Ambareen Musa, founder and chief executive of Souqalmal.com

Starting with the harsh truth, which you too should know by now: with seven credit cards and a personal loan amounting to Dh170,000 in total debt, and a family to raise in the UAE, your salary is just not enough to cover all your liabilities.

Addressing the more difficult part first, have you thought about sending your children back to the Philippines? You can arrange for them to stay with their grandparents for a year or two while you and your wife work towards fixing your debt situation here. The stark difference in the cost of living alone would help you save significantly on childcare costs. You and your wife can also move to a smaller accommodation here to save on rent.

You mention that you previously approached your primary bank to apply for debt consolidation, which was rejected. If you can sustain yourself financially for the next few months, while managing to close one or two of the credit card accounts, it might be worthwhile to check with your bank again, as well as other banks, if you qualify for a debt consolidation loan.

Keeping your monthly expenses to a minimum, you must start systematically paying off your debts, starting with the credit cards. Even as you focus on repaying the credit card debt with the highest interest rate first, consider applying for a credit card that offers a zero per cent balance transfer option. If you can move some of your existing card debt to this new card, you can aim to pay it off before the interest-free period expires, which is usually a maximum of six months.

On the bright side, your wife is starting work soon, so that will help bring in a much-needed additional source of income. You can then use the majority of the joint income to settle your debts. After six months of working, she will also be eligible to apply for a personal loan, provided she meets all other qualifying criteria. You can use the loan to repay and close the outstanding debt on your credit cards. This will help convert your most expensive debt into one that accumulates lower interest.

In the meantime, make sure you don’t ignore any calls from the bank, and keep paying the regular loan instalments and minimum payments on all the remaining credit cards. Also, if you decide to approach a debt consultant, make sure they are a registered company in the UAE. Contact the debt consultant you spoke to and ask them to return your cheque and refund the Dh2,000 charged, since they haven’t helped in any way and it’s been over a year.

Debt panellist 2: Keren Bobker, The National's On Your Side columnist and an independent financial adviser

It is essential that JR makes at least the minimum payments on these debts, as otherwise the consequences will be severe. Once three payments are missed the banks will most likely register a police case against him, which can lead to arrest and imprisonment, but this can be avoided by making the minimum payments. Making these minimum payments will also avoid him receiving calls from banks and these only add to the stress levels.

This is a classic case of poor money management and debt building up to unmanageable levels. And it is a case of being irresponsible, as we all know that monies borrowed must be repaid. Having multiple credit cards is rarely a good idea, especially where someone is not repaying the monies in full after a short time.

Under current UAE Central Bank rules no one is permitted to borrow money where the repayments exceed 50 per cent of their monthly income, known as the Debt Burden Ratio. So, if JR’s repayments on all his current debts are already at Dh4,375, no bank is allowed to lend him any more money, and to do so would be irresponsible.

I generally do not advise people use debt consultants, as I do not know of any good outcomes from them and it is not wise to pay them money upfront, especially if you are already struggling. As money has already been paid, JR should revert to the company and ask for evidence of work being done, as it seems they have not helped at all, or request a refund plus a return of the post-dated cheque. Because of data protection rules these companies can rarely negotiate with banks on behalf of clients, so I would be extremely wary of any claims.

While I appreciate that money is tight, it is unlikely that any of the credit card companies would be willing to negotiate with payments, so JR needs to do his very best to maintain payments for the time being as I note that household income will increase before too long. Hopefully this will make a difference and ease the situation for the family.

In the long term, it is important that he makes payments in excess of the minimums on the credit cards, as otherwise the outstanding debt will never be reduced and he will continue simply to pay high levels of interest. Are there any other ways of raising money? Can he work any overtime, sell any items or assets, or even borrow some money from a family member to reduce the total?

The Debt Panel brings together four financial experts: Jamal Alvi, the chief credit officer at Abu Dhabi Islamic Bank; Ambareen Musa, the founder and chief executive of the comparison website Souqalmal.com; Rasheda Khatun Khan, a wealth and wellness planner and founder of Design Your Life; and Keren Bobker, The National’s On Your Side columnist and an independent financial adviser with Holborn Assets in Dubai. Together they answer queries in a weekly online column to help readers better tackle their debts. If you have a question for the panel, write to pf@thenational.ae.

Follow The National's Business section on Twitter