The Debt Panel: 'The banks harass me and threaten to bounce cheques but is that still a criminal offence?'

I have so many liabilities and the bank collection departments are always harassing me. They want to file a case against me and tell me they will deposit my security cheques, some of which are in Abu Dhabi. Is it the case that bouncing a cheque is no longer a criminal offence? I work in the oil and gas industry in Dubai, earning Dh15,000 as an expeditor, and have lived in the UAE since 2002. My debt issues started when I started paying for my mother's medical expenses in the Philippines, where she is on weekly dialysis.

In total, I owe:

Outstanding/monthly repayments/months of delayed payment

Credit card:  Dh36,000/Dh2,500/three months

Loan 1: Dh18,000/Dh1,420/three months

Loan 2: Dh8,000/Dh1,000/three months

Loan 3: Dh30,000/Dh1,700/ three months

Loan 4: Dh149,000/Dh7,000/ on time

My monthly expenses are: 

Payments for loan 4: Dh7,000

House Rent: Dh3,500

Food: Dh1,500

Money sent to the Philippines: Dh2,000

Balance: Dh1,000

 What should I do?  

EM, Dubai 

Debt panellist 1: Kunal Malani, head of customer value management at HSBC

I am sorry to hear about your mother's health and hope she is recovering well. While I can appreciate the underlying need to borrow money for your mother's medical expense, you have borrowed far in excess of your ability to repay. It also looks like the banks you borrowed from were not made aware of your previous borrowings, else they may have reconsidered before extending you loans 2, 3 and 4. Your current level of debt outstanding and ongoing repayment obligations, plus expenses against your income are clearly unsustainable.

Readers should note that the UAE now has a credit bureau where banks can access information about your current levels of debt, your monthly instalments and your credit card outstanding. This helps banks and customers manage individual debt obligations better, before opting for any new loans. This also helps people be more aware of their personal liabilities.

EM, you are best off working with these banks on a formal settlement agreement, if they agree to offer you a settlement. At a minimum, you could talk to Bank 4 about increasing your loan so you can consolidate your credit card (which might have a high rate of interest) and your smaller loans into one loan. You might also want to ask them for a longer tenure to reduce your monthly payments. That way, at least Banks 1 and 2 – where you have smaller loans – will stop following up with you.

However, even with doing everything of the above, it may still not be enough. If it is possible you may consider arranging to dispose of any personal assets you might have either here or back home in Philippines to help contribute to repaying your obligations.

With regards to bouncing a cheque – the laws have evolved but it is still very much considered an offence. The Dubai Courts could issue you a fine and could still impose a travel ban on you for unpaid debt. You are best off working with your bank towards an amicable settlement.

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Read more:

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Debt panellist 2: Rasheda Khatun Khan, a wealth and wellness planner

The first thing to do is contact all the banks. Explain your situation and see what solutions they have. Perhaps you can request a deferment or restructure. Start with the bank with the Dh149,000 loan attached. As you have kept up all payments you may be able to negotiate a restructure or deferment. This way you can release funds to repay the other loans too.

Another option to explore is a consolidation loan. This is where a bank will transfer the lending onto a manageable monthly installment loan over a number of years. You can make a request at the bank if this is on option for you. Alternatively, explore debt consolidation companies; their primary objective is to negotiate with the banks and act as a go-between to help you source the consolidation loan. If they are able to find you the consolidation loan, they will then charge you a fee depending on the complexity of your case.  Sometimes this avenue is more helpful as they have relationships with banks to be able to get authorisation on a loan that you are not at first attempt.

On the other hand, it can also be useful to approach the banks yourself - but in this instance you need to be equipped with your own numbers, knowing what you can afford to repay on a monthly basis. Make sure you go through your expenses and come up with a realistic figure for your monthly repayments towards repaying debt. That way you know what you can actually afford otherwise you risk ending up in the same situation again.

Bouncing a cheque still has it's consequences. Recently Dubai Courts announced the issue of fines instead of jail terms for bounced cheques from December 2017. This still should be avoided as it will only increase the amount of debt, especially if you do not have the money to pay the fines.

What is most important here is stopping this cycle of borrowing. You must ensure your total monthly expenses are less than your monthly income. Ask other family members if they can cover some of your family medical costs at this time to help you avoid any more repercussions.

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Read more:

Bounced cheques to no longer go through Dubai court system

A nine-step guide to help you renegotiate bank debts in the UAE

The Debt Panel: 'I bailed out my mum when my dad died and now owe over Dh240,000'

The Debt Panel: 'I borrowed Dh50,000 on credit cards to pay family medical expenses and friends' shopping bills'

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Debt panellist 3: Michael Routledge, a debt adviser 

The changes in the bounced cheque regulations only relate to Dubai, and although a cheque bounced in Dubai will not longer through a court, you will be fined. Looking at your salary versus you your cost of living I’d want to understand a few more details.

Rent: your rent is currently Dh42,000 per year, which I think could be reduced if you were to consider shared accommodation until your debts are paid off.

Money to send back home: I understood from the breakdown of your costs that you pay for your mother's dialysis, does this cost Dh2,000 per month or can this be reduced?

Balance: as you’ve mentioned food etc. in your cost of living why do you need a ‘balance’. Theoretically you could pay that Dh1,000 off of Loan 2 and clear it in eight months.

As is often my response, you should prepare a detailed, transparent statement of accounts that shows your creditors your salary, cost of living, and a breakdown of your debts. You should also obtain your credit report from the Al Etihad Credit Bureau to support this. Please be aware that your lenders will likely not accept the payments sent back to the Philippines as a genuine cost of living.

I believe with some reasonable cost cutting, and some negotiation with your lenders there is no reason why you cannot service the debt you have accumulated, but be prepared for a lot of hard work, as your lenders will undoubtedly push back at your first attempt.

On this panel this week: Kunal Malani, head of customer value management, UAE and Mena at HSBC Middle East; Rasheda Khatun Khan, a wealth and wellness planner and founder of Design Your Life and Michael Routledge, a UAE-based debt adviser

The Debt Panel is a weekly column to help readers tackle their debts more effectively. If you have a question for the panel, write to pf@thenational.ae