Temporary foreclosure - Decker, Pex, Levi

A temporary foreclosure order allows a plaintiff in a civil lawsuit ensure to that, if he wins the lawsuit, he will receive the compensation he deserves. Just as a stay of exit order prevents a debtor, spouse in divorce proceedings, or a defendant in a civil lawsuit from leaving the country and evading law enforcement, so temporary foreclosure is intended to prevent the defendant from selling, gifting, or lending the foreclosed assets before the end of the trial. Without such an order, it is quite possible that winning a lawsuit, with all the expenses, hassle, and investment of time involved, will not give the plaintiff anything other than a few well phrased sheets of paper to frame and hang on the wall. The order is, therefore, a type of temporary relief that ensures the proper execution of the judgment. However, it is obvious that there are serious limitations regarding the goals, means, and assets that may be temporarily foreclosed, so that the defendant may continue to function in society, his business, and his personal life. This article by lawyer Michael Decker explains when, why, and how a temporary foreclosure order is imposed.

Why Is a Temporary Foreclosure Order Imposed?

The debtor’s assets or property are usually foreclosed only after the decision has been made that these assets belong to the plaintiff legally, or that taking control of these assets is a good way to ensure that the debtor will do his best to repay the debt to the plaintiff. In addition, there is always the possibility of selling the property in order to repay the debt or part of it. But what can be done if the debtor transfers the disputed assets / valuables in his possession to someone else before the Writ of Execution / civil lawsuit is completed to the creditor’s satisfaction? Since a judicial decision has not yet been made stating that these assets do not belong to the debtor, there is nothing to prevent him from smuggling them, selling them, gifting them, or concealing them, thus preventing the execution of the judgment in the future.

This realistic possibility, that a plaintiff in a civil lawsuit or divorce proceedings, whom the State decided deserves compensation from the debtor, will be left empty-handed because the assets that are his according to the judgment are no longer in the defendant’s possession—these are the circumstances due to which an order temporarily foreclosing the debtor’s assets is sometimes needed even before there has been a final decision on the matter by the court or Writ of Execution. The foreclosure order prevents the debtor from using his assets or transferring them to another party until a decision is made on the matter. The powers of the court (or rabbinical court) to issue a foreclosure order are based on the Israeli Civil Procedure Regulations, 1984.

So What Prevents Anyone from Suing Another Person for No Reason and Causing All Their Assets to Be Foreclosed?

The description above draws a picture of a defendant or unscrupulous debtor who refuses to pay his justified debts. However, the legislature understood, of course, that the opposite is also possible. Someone may harass another person with lawsuits that are not in good faith, or even use the threat of lawsuit and foreclosure for wrongful purposes. To prevent this, a plaintiff who wishes to obtain a temporary foreclosure order from the court must state and detail the causes of action and the reasons why the temporary foreclosure is necessary, justified, and limited in scope. In addition, he must bring documents and evidence to support his legal claims and his fear that the defendant will move or hide his assets before receiving the verdict. However, it is not necessary for the plaintiff to prove his preliminary claims as meticulously as in the trial itself. Usually, the plaintiff will be required to deposit a high amount of funds as a guarantee which is meant to cover the damage and mental anguish which will be caused to the defendant as a result of the foreclosure, in case it turns out to be in fact a frivolous claim.

The court will examine the weight of the evidence and the possible damage to the defendant compared to the possible damage if the defendant smuggles his assets and hinders the execution of the judgment. In legal parlance, this is a “balance of convenience” – the inconvenience to the defendant forced to manage without the foreclosed property for a certain period of time, compared to the inconvenience that will be caused to the plaintiff if the property is disposed of by the defendant.

An ordinary person might be surprised to hear that temporary foreclosure of real-estate property or a savings plan is sometimes easier than foreclosure of a car or bank account. Temporary foreclosure of real estate prevents the defendant from transferring it to another person, but does not prevent daily use of, and residence on, the property. The same goes for a savings plan, which remains unchanged even when it is foreclosed, but the defendant cannot use the money in it. In contrast, the foreclosure of certain assets will substantially harm the defendant’s daily life (and may even impair his efforts to repay the debt). The law also lists which assets may never be foreclosed.

Which Assets May Be Temporarily Foreclosed if Needed?

In fact, any significant property may be foreclosed by law, provided it is necessary and the court approves it. However, in addition to the court order in itself, any third party responsible for monitoring the foreclosed property must also be notified. For example, if a car is foreclosed, the licensing office must be notified. Foreclosure of real estate must be properly registered in the land registry deed (Tabu).

Regarding foreclosure of money in a bank account, the bank itself must be notified – and here it should be noted that it is much easier to impose a temporary foreclosure on savings or any type of money set “aside,” but it is complicated and difficult to foreclose funds in the defendant’s current account. After all, the money in the current account is certainly essential for the defendant in order to manage daily life, pay current bills, and the like.

How Can a Temporary Foreclosure Order Be Canceled?

What happens if you are a debtor or are sued, and a foreclosure is imposed on an asset that is essential to running your business or your livelihood? If you cannot wait until the lawsuit is heard (or you are not sure that the court will make a decision in your favor) there are two parties who are authorized to cancel the foreclosure order – the plaintiff or the court. It is possible to reach an understanding with the plaintiff or his lawyers through an agreement (preferably, a signed agreement reviewed by both parties’ lawyers) a compromise regarding the payment of the debt / compensation and cancellation of the order due to cancellation or suspension of the claim.

Also, within 30 days of receiving the order, the defendant may request the court to cancel the order or, alternatively, to foreclose a different property than the one stated. The alternative property must be of equal monetary value. This enables the foreclosure of a property that the defendant does not need as much for the management of his daily life or business. Of course, the request must be substantiated by documents and evidence.

Contact Us:

Whether you want to temporarily foreclose the assets of a debtor or you want legal assistance in canceling a temporary foreclosure order, we are here at your service. Our law firm in Jerusalem and Tel Aviv specializes in the field and will be happy to give you information and legal help.