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Insolvency and bankruptcy in Israel: the road to a discharge order

Insolvency (chadlut piraon) is the proceeding that replaced bankruptcy in Israel. Someone who cannot pay their debts files an application, pays for a period according to their ability and a plan set for them, and at the end can receive a discharge order that releases them from the remaining debts included in the proceeding.

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  • A check whether the proceeding fits, or a settlement is better
  • A complete, accurate application to open proceedings
  • Guidance through the proceeding to discharge

What changed in 2019

The Insolvency and Economic Rehabilitation Law, 5778-2018, came into force in September 2019 and replaced the Bankruptcy Ordinance. Its aim is economic rehabilitation: not only dividing what there is among the creditors, but letting the debtor finish the proceeding and start again.

The stages of the proceeding

  1. An application to open proceedings, with a full account of debts, income and assets.
  2. An order opening proceedings: Execution Office proceedings against you are stayed, and a monthly payment is set.
  3. A review by the trustee, and the creditors file their proofs of debt.
  4. An economic rehabilitation plan that sets how much you pay and for how long.
  5. A discharge order at the end of the plan.
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Who handles the application

When the total debt is relatively low, the proceeding runs before the Execution Office registrar. With higher debts it runs before the Insolvency Commissioner and the court. The amounts that decide the track are updated from time to time.

Insolvency when you live abroad

The proceeding requires full cooperation: disclosing all income and assets, including abroad, and keeping up with the payments set. Before choosing this route it is worth checking whether a debt settlement with the creditors fits better.

Common questions

What is the difference between bankruptcy and insolvency?

Bankruptcy is the name of the old proceeding. Since September 2019 the Insolvency and Economic Rehabilitation Law applies, and the proceeding is called insolvency. People still search for "bankruptcy", but it is the same need.

What is a discharge order?

An order given at the end of the proceeding that releases the debtor from the remaining debts included in it. Some debts, such as child support and criminal fines, are not erased by a discharge.

Are there restrictions during the proceeding?

Yes. During the proceeding the debtor is under restrictions, for example on taking credit, and leaving Israel can be restricted. The restrictions are set in the order and in decisions in the proceeding.

The information on this site is general information about Israeli law and procedure, not legal advice for a specific case.

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