Debt Collection in Bahrain: Legal Process and Procedures

Recovering outstanding debts is a critical concern for businesses operating in Bahrain. Whether you're a local enterprise or a multinational corporation, understanding the legal framework for debt collection helps you protect your receivables and maintain healthy cash flow. This guide explains the process from initial demand to final enforcement.

The Legal Framework

Debt collection in Bahrain is governed primarily by the Civil Code (Law No. 19 of 2001), the Commercial Code (Law No. 7 of 1987), and the Civil and Commercial Procedures Law. The courts distinguish between civil debts (arising from personal transactions) and commercial debts (arising from business activities), with commercial disputes typically enjoying expedited procedures.

Pre-Litigation: The Demand Letter

Before initiating court proceedings, creditors should send a formal demand letter (إنذار) through a licensed attorney. This legal notice serves multiple purposes: it formally documents the debt and demand for payment, starts the clock on interest calculations, demonstrates good faith efforts to resolve the matter amicably, and is often required by the court as evidence that litigation is necessary.

A well-drafted demand letter specifies the exact amount owed, the basis of the debt (contract, invoice, cheque, etc.), a deadline for payment (typically 7-15 days), and consequences of non-payment. Many disputes are resolved at this stage when debtors realize the creditor is serious about pursuing legal action.

Types of Debt Collection Cases

Payment Order Procedure (Summary Proceedings)

For debts supported by strong documentary evidence—such as acknowledged invoices, signed contracts with clear payment terms, or promissory notes—creditors can apply for a payment order through the Execution Court. This expedited procedure bypasses full litigation and can result in an enforceable order within weeks rather than months.

Cheque Cases

Bounced cheques receive special treatment under Bahraini law. Under the recent amendments (Law No. 23 of 2025), dishonored cheques can be enforced directly through the execution court without requiring a separate lawsuit. The drawer has limited defenses, making cheque-based collection relatively straightforward. However, issuing a cheque without sufficient funds now carries civil penalties rather than criminal prosecution.

Full Litigation

When the debt is disputed or lacks clear documentation, full civil or commercial litigation is required. Cases are filed with the appropriate court based on the amount: Minor Civil Court for claims up to BD 3,000, High Civil Court for larger claims. Commercial cases between businesses are heard by specialized commercial chambers.

The Litigation Process

A typical debt collection lawsuit proceeds through several stages. Filing involves submitting the statement of claim with supporting documents and paying court fees (approximately 1-3% of the claimed amount). The court then serves the defendant, who has 10 days to file a defense. Hearings follow, where parties present arguments and evidence, with the court potentially appointing experts for complex cases. Finally, judgment is issued, with courts typically ruling within 3-6 months for straightforward commercial claims.

Enforcement of Judgments

Obtaining a judgment is only half the battle—enforcement converts the judgment into actual recovery. Once a judgment becomes final (after appeal periods expire or appeals are exhausted), the creditor obtains an execution writ from the Execution Court.

Available enforcement mechanisms include bank account attachment (the most effective method, allowing direct seizure of funds), salary attachment (up to 25% of the debtor's monthly salary can be garnished), asset seizure (movable and immovable property can be seized and auctioned), and travel bans (the court can impose travel restrictions on individual debtors).

Bulk Debt Collection for Corporates

Telecom companies, banks, and other businesses with high-volume receivables require specialized handling. Sahwan Law provides bulk collection services that include systematic demand letter campaigns, batch filing of court cases, portfolio management and reporting, negotiated settlement programs, and coordinated enforcement actions.

Our technology-enabled approach allows efficient handling of hundreds or thousands of cases simultaneously while maintaining individual case attention where needed.

Alternative Dispute Resolution

Not all debt disputes require litigation. Mediation and arbitration can offer faster, more confidential resolution. The Bahrain Chamber for Dispute Resolution (BCDR) provides specialized commercial dispute resolution services. Many commercial contracts include arbitration clauses that require disputes to be resolved through arbitration rather than litigation.

Limitation Periods

Creditors must act within statutory limitation periods or lose their right to sue. Commercial debts are generally subject to a 10-year limitation period, while cheques must be presented within 6 months of the issue date. Certain claims (like those arising from employment) have shorter periods. Once a claim becomes time-barred, the court will dismiss it regardless of its merits.

Cross-Border Debt Collection

Collecting debts from parties outside Bahrain involves additional complexity. Bahrain is party to the GCC Convention on Execution of Judgments, allowing relatively straightforward enforcement of judgments from other Gulf states. For judgments from other countries, enforcement depends on bilateral treaties or reciprocity principles.

Best Practices for Creditors

Prevention is better than cure. To minimize collection problems: conduct due diligence before extending credit, use clear written contracts with payment terms and penalty clauses, invoice promptly and follow up immediately on overdue payments, obtain security (personal guarantees, post-dated cheques, bank guarantees) where possible, and engage legal counsel at the first sign of payment problems.