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Insolvency in Israel


Nechama Ovadia

Insolvency in Israel is unfortunately a frequent process. The pace of economic life can often lead people to financial commitments that they fail to meet. According to Israeli law, a person caught in this situation may initiate bankruptcy / insolvency. Correctly completing insolvency proceedings in Israel will result in the discharge of the debt.

In this article, advocate Nehama Ovadia details the reasons and results of filing for insolvency in Israel. This process fulfills a number of important goals; rehabilitating the debtor and providing them an opportunity to start a new chapter in their life.

The process of insolvency in Israel and economic rehabilitation:

Insolvency in IsraelBankruptcy laws concern a situation in which a person can not pay their debts. The provisions of insolvency in Israel are regulated by the Bankruptcy Ordinance (New Version), 1980, and the Bankruptcy Regulations, 1985. In March 2018, the Knesset passed the Law for Insolvency and Economic Recovery, 2018.

This new law seeks to promote rehabilitation as the main purpose of insolvency proceedings. This changes the assumption that non-payment of debt is a moral defect on the debtor’s part, and laws regulating insolvency must punish or educate the debtor. This assumption cannot stand in the modern era in which consumer credit constitutes a large part of the use of credit in Israel’s economy.

Can anyone begin a process of insolvency and economic rehabilitation in Israel?

Only an adult (aged at least 18) resident of Israel can start the process. The insolvency procedure can be initiated by the creditor or the debtor. If the debtor wishes to commence proceedings of his own initiative, in accordance with the provisions of Section 17 of the Ordinance, among other things, his obligations must be at least NIS 17,307.

The application for a receivership and bankruptcy order involves payment of a fee to the official receiver. The application and the fee voucher are submitted to the receiver, who examines the application and formulates his position, which is filed in a bankruptcy court. In accordance with the recommendation of the receiver, the court signs the receivership order, determines a monthly payment that the debtor must pay to the creditors and a date for discussion after 18 months have passed.

The supervisor of the proceeding is the official receiver who serves as trustee for the debtor’s assets if no other trustee is appointed. His function is to ensure that the procedure is conducted in a proper and neutral manner. The District Court holds jurisdiction over proceedings of insolvency in Israel.

What are the benefits of insolvency and economic rehabilitation?

The main advantage of this procedure is that all collection proceedings against the debtor are “frozen”. The debtor receives a respite from his creditors. Among other things, the foreclosures imposed on his salary and the current account will be canceled, any restriction imposed on his driver’s license will be revoked, he will be authorized to open and manage a bank account, any stay of exit orders may be removed, and at the end of the process he is given an order to leave his previous economic troubles behind and embark on a new path.

Why is it important to consult with an attorney?

Each field of law in Israel has different systems and provisions. It is very important to consult with an expert in a specific field, particularly when undertaking a major decision. If you have debts and cannot meet them and you are considering opening insolvency proceedings and economic rehabilitation, you should contact an expert lawyer who can formulate a professional response at the highest level and conduct the procedure in the best possible way while safeguarding your interests and coping with possible obstacles.

Contact our insolvency in Israel experts

The law firm of Cohen, Decker, Pex, Brosh, specializes in civil law. We help Israeli citizens and residents handle insolvency proceedings, foreclosures, and other similar processes. If you are a foreign citizen who has a debtor in Israel, we will also be happy to assist you. Contact us for legal aid and advice.

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