Debt Collection in Bahrain

The debt collection procedure in Bahrain begins with an assessment of the debtor’s solvency, scope of activity, business history, documentary evidence of the debt, current court cases and enforcement proceedings, and the possibility of disputing the debt. This assessment determines the strategy to be utilized on behalf of the client in the recovery process.

If the debtor has no ongoing court cases or outstanding judgments for debt collection and is actively engaged in commercial activities, then it is advisable to use the out-of-court debt collection stage.

This stage involves active negotiations with the debtor in order to reach an agreement on payment of the creditor’s claims or other possible settlement options (e.g. return of goods, transfer of the debt to a third party, exchange of services or goods).

Interaction with the debtor begins immediately after sending a notice by mail, email, phone or instant messengers. This process involves intensive communication with the debtor in order to exert constant pressure. The main objective is to establish contact with key decision makers to achieve early recovery of the debt.

The average time for informal out-of-court collection is up to 60 days (except in cases where a payment plan has been agreed upon). If this stage does not produce the expected results or after an initial analysis it becomes clear that it is not applicable, it is necessary to proceed to collection through the courts.

Before initiating judicial collection, it is worth paying attention to the limitation period. The general limitation period is 15 years. The limitation period for the collection of commercial debts is 10 years. The consequences of the expiration of the limitation period are applied in the court of first instance and on appeal only at the request of the debtor. The limitation period is interrupted by an explicit or tacit recognition of the creditor’s claims by the debtor. After the interruption, the limitation period begins to count anew.

Bahraini law provides for judicial collection of debt in the ordinary court procedure.

The courts of first instance are the lower court, which has jurisdiction over debt cases involving claims of up to BD5,000, and the high court, which has jurisdiction over debt cases involving claims of over BD5,000.

The normal judicial procedure begins with the filing of a claim with the court. The court secretary then opens the case and, after the fee has been paid, registers the claim in the court register and places the original claim and the receipt for payment in the case file. The following day, the secretary sends a copy of the claim to the defendant. The defendant may, within ten days from the date of notification, file a memorandum of objection and such documents as he deems necessary with the court. If the defendant exercises his right to object, the plaintiff also has ten days from the expiration of the said period to submit his documents and explanations in response to the defendant’s objection.

After the expiration of the said periods, the court secretary sets a date for the hearing of the case and notifies the parties with a request to appear at the hearing. Before considering the claim on the merits, at the first hearing the court must check: the claim’s compliance with the requirements of procedural law; and the correctness of the procedure for notifying and summoning the defendant. If violations are found, the court adjourns the hearing and orders the violations to be corrected.

If the plaintiff has appeared and the defendant is absent, the court, after checking that proper notice has been given, may continue to consider the case in the defendant’s absence at the request of the plaintiff, who has the right to present evidence. However, the plaintiff may also ask to adjourn the case and notify the defendant, warning that the decision taken will be final. If the defendant appears before the end of the hearing, any decision taken against him is considered not to have been taken, and the court must familiarize the defendant with the procedure that was carried out in his absence. The court may repeat this procedure if it considers it necessary for justice.

The hearing of the case is held at the first hearing. However, both the plaintiff and the defendant may ask for an adjournment in order to present a document or evidence in response to the defense or counterclaims of the other party. No adjournment may be granted more than once for the same reason relating to one of the parties, and the period of adjournment shall not exceed three weeks.

During the hearing, the court shall hear the positions of the parties, examine witnesses if necessary, examine written evidence and, after the parties have held their arguments, shall make a decision immediately after the conclusion of the trial, if possible, or at another hearing scheduled for this purpose.

The parties may agree that the decision of the court of first instance will be final and not subject to appeal. In the absence of such agreement, the decision of the lower court may be appealed to the High Court. The decision of the High Court may be appealed to the High Court of Appeal. The decision of the High Court of Appeal may be appealed to the Bahrain Court of Cassation. The appeal period is 30 days from the date of notification of the contested decision. The decision of the Court of Cassation is final and not subject to further appeal.

After the judgment comes into legal force, the creditor should initiate the procedure for enforcement. The judgment may be presented for enforcement within 15 years. Within the framework of the enforcement of the judgment, the creditor’s claims may be satisfied by seizing and writing off funds from the debtor’s accounts; seizing the movable and immovable property of the debtor and then selling them; seizing and confiscating securities; seizure and confiscation of the company’s shares, seizure and confiscation of the debtor’s property held by third parties.

An alternative option for debt collection from a company or an entrepreneur is the bankruptcy procedure of the debtor. According to the Bahraini Reorganization and Bankruptcy Law, a creditor has the right to initiate this procedure in one of two cases: 1) if the debtor is unable to pay his undisputed debts on the due date, provided that he has been officially sent a written warning about the need to pay, and he has not fulfilled the obligation within thirty days from the date of notice; 2) if the amount of his financial obligations exceeds the value of his assets. If the amount of the claim is less than twenty thousand Bahraini dinars, filing a bankruptcy case is allowed on the basis of claims filed by at least three creditors. At this stage, if the debtor’s assets are insufficient to fully satisfy the creditors’ claims, it is possible to cancel the debtor’s transactions made with the intention of causing damage to creditors. Such transactions or actions shall include, in particular: any transactions in which the debtor undertakes an obligation with the intention of defrauding or damaging his current or future creditors in obtaining their claims; any transactions in which the debtor does not receive fair compensation for this action or undertakes an obligation that does not bring benefits, provided that the debtor is in a state of bankruptcy or becomes bankrupt as a result of such action or obligation; actions and payments that give priority to one creditor over others. An application for the annulment of such a transaction or obligation must be filed within six months from the date of approval of the commencement of bankruptcy proceedings. This period is one year if the opposing party is an insider. As a result of the annulment of the above transactions, it is possible to return back to the debtor what he lost from such transactions and thereby increase the liquidation estate to satisfy the claims of creditors and cover the costs of implementing the bankruptcy procedure. 

If you have any questions or need support on international debt collection in Bahrain, our company is ready to provide its expert assistance to effectively resolve your financial issue. Contact us to get additional information and professional support from specialists of the leading debt collection agency.

# DEBT COLLECTION AGENCY BAHRAIN

05.11.2024

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