Saudi Arabia: Jail Terms for Debtors Could be Scrapped

Saudi Arabia: Jail Terms for Debtors Could be Scrapped News developments

Saudi Arabia: Jail Terms for Debtors Could be Scrapped

Gulf News (United Arab Emirates), 18 May 2021: According to local media reports, Saudi Arabia’s Justice Ministry is understood to have approved amended debt penalty rules.

Under the amendments, jail terms for debt defaulters will be scrapped.

The amendments also include ending suspension of Government services provided to and financial dealings with defaulters as well as giving defaulters a right to sufficient notice to repay debts before their assets are seized to recover the arrears. During this notice period, defaulters can make representations to the authorised officer and set out their objections to the repossession notice.

Under the new rules, State-owned funds, the house in which the defendant and their legal dependents live cannot be seized. However, the house can be seized if it is mortgaged to the creditor. They may also not seize the transport used by the defendant and their legal dependents unless it is mortgaged to the creditor.

In addition wages and salaries may not be seized unless it is half of the total wage or salary, for the alimony debt and one-third of the total wage, or salary for other debts.

Half of the total wage or salary is allocated to the alimony debt and one-third of the remaining 50% for other debts and in the event of multiple debts like this, one third of the half will be distributed among the creditors in line with the law.

They may also not seize anything which is required for the defendant to practice their profession or the personal requirements of the defendant and Government subsidies provided to the defendant.

A right to ensure fair value and realise balance proceeds will be guaranteed under the new rules. Resisting or suspending execution of attachment on properties will lead to a jail term of up to seven years and a fine of up to 300,000 Riyals.

Declarations of bankruptcy are historically very rare in Saudi Arabia. In most cases, a bankruptcy declaration will lead to a jail term of between five and seven years to ensure the bankruptcy claim was not fraudulent.

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Marlé Van Sandwyk