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"About 20,000 businesses are expected to reach the process of freezing proceedings"

This is how CofaceBDI estimates the depth of the economic crisis in Israel.

More and more business owners are turning to a freezing procedure: "The corona has destroyed the business."

The Collection Authority fears: "When the banks run out of patience and the grants and challah run out, we will see an increase in the opening of OTZLP cases."

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Shani Ashkenazi and Ella Levi-Weinrib

Thursday, 11 February 2021, 05:58

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In the video: The Big complexes were opened using the takeaway method and in violation of the guidelines, the beauty salons and hairdressers returned to the activity (Photo: Shlomi Gabay, Yotam Ronen, Reuven Castro Edit: Amit Simcha)

The process of freezing proceedings is designed to give businesses a time-out that allows them to defer execution of liabilities and delay claims against the company in order to recover and repay debts to creditors.

A similar process intended for private individuals or licensed dealers exists in the context of insolvency proceedings (bankruptcy).

The corona crisis seems to be sending more businesses into such processes, while many of them are buried under the mountains of debt.

The problem is that if the business is closed due to corona restrictions and it continues to accumulate debts and losses, a stay of proceedings becomes a ticking clock for the end of the business, and is not a solution for the disabled businesses.

According to Tehila Yanai, CEO of the business information company Cofacebdi, about 65,000 businesses have run into difficulties because of the corona, in addition to about 55,000 who are in routine difficulties. A maximum of 3% -5% will survive.

According to enforcement data, currently there are about 593,000 debtors against whom more than 2 million cases are open. In 2020, the corona year, the number of cases opened increased by 6% - from 300,000 To 318,000, compared with a 4% increase between 2018 and 2019. The data reveal that while in the first months of the crisis, March to May, there was a decrease in the number of execution cases opened, starting in June there was a steady increase in the number of cases, by 2,000 Cases per month more than in 2019, to 9,000 newer cases in one month (October 2020 compared to 2019).

Is it possible to attribute the increase in the number of cases that were actually opened to Corona? The Enforcement and Collection Authority says that at this stage not all , Although it is clear that the data also to some extent also reflect the economic crisis and are already seeing its initial impact on the debts of the population.

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However, the Enforcement and Collection Authority estimates that the worst is yet to come, and the fear is that when government support for the public, both employees and the self-employed, ends, there will be a more significant collapse and debts that will be reflected in OTLP proceedings. "We are afraid that when the banks lose their patience and the period of grants and payments ends, there will be a significant increase in both the opening of execution cases and the opening of insolvency cases."

He said, "The Enforcement and Collection Authority has been active since the beginning of the Corona crisis to promote a law that provides relief to debtors in execution whose cases have been opened since September 2020, and even earlier.

In addition, in the first closure most of the collection proceedings were frozen and later under the Corona Act no operational proceedings are taken for the removal of foreclosures, seizure of vehicles and subsequent orders.

In addition, you can always contact enforcement officials with requests to cancel proceedings and payment orders.

The mechanism for collecting fines has also developed a mechanism for spreading debts and reducing arrears, and thousands of debtors have already been helped by it. "

"There is a corona, but there is no one to talk to. I begged the special principal to give us time."

Shortly before the start of the corona year, N. received permission from the court to rehabilitate the company he founded.

At one point poor financial planning led the business to difficulties, debts piled up and he went into a moratorium on proceedings.

A recovery plan was built to allow the business to make order and rise, but one significant detail was missing in this future equation: the corona.

N. deals with digital marketing, mainly for restaurants - one of the areas that has suffered the hardest hit.

"These are about 450 restaurants that we work with on a regular basis. Within three months we raised almost 100,000 shekels for the company's coffers, but suddenly in February the corona came - and with it began canceling restaurant checks. Events in Rishon Lezion, which rolls in millions, returned me "A check for NIS 700, and he told me to sue him. A lot of checks came back, and the company collapsed," he says.

"I fired all the workers - ten people, and I was left alone. My turnover was half a million shekels a month, but the corona destroyed my business."

The business's liabilities suddenly became irrelevant.

If a moment before the Corona he had already seen the horizon, now he is faced with an impossible reality, which threatens his ability to rehabilitate the business in the period allotted to him.

"I had to go to court and ask to start recovery in June 2021," he says.

"There is Corona, but there is no one to talk to. I begged the special manager to give us time. People are not willing to commit to long-term deals, even though we have expenses. I am left with NIS 150 from a deal. It is an economic catastrophe. I am 15 years independent, and in my life I have not passed Such a thing".

Did you receive assistance from the state during this period?

"I received NIS 750 per account. Besides, absolutely nothing. I earn NIS 50,000 a month, and am left with NIS 15,000, in which I have to pay rent and alimony. I stay even before spending on food and fuel with NIS 1,000. I increase my deficit. Once I was abroad three times a year, traveling in a jeep.

Today, sometimes I have 50 shekels in my pocket, I say to myself - I drive the car and leave the house.

I have to buy a cottage for children with this money.

There is no money, and the bank does not give credit.

When I got to the banker, he laughed in my face. "

N. lowered prices, made changes in the business and tried to adjust himself. But during the Corona period not only the financial difficulty increased: his mother died of corona and his father died of cancer within a few months." I told the court not to make a discount, Just wait for the corona to run out.

We sent a request to the court, after the special principal wanted to cancel the whole arrangement, when I was struggling with this crisis that the business got into, after both my parents passed away.

I'm waiting for the court's decision, and I hope they understand that I want to pay and rehabilitate the company, it has potential, just give me time.

I can not own. "

Mr. Kobi tenure, specializing in commercial and insolvency proceedings and represents N., explains," in order to allow air to breathe these businesses, the state should help businesses damaged during the corona in three things: one - speeding up the receipt and removal of barriers and bureaucracy to That the grants can help immediately before the business collapses.The second - to defer payments for a period of one year in order to reduce the business owner's expenses, and the third - to give state-guaranteed loans that the state will guarantee the banks at about 50% of the loan and not at 15%. The banks give loans to businesses with real collateral to the banks, "he says.

We really do not want to see it, but it seems that for many businesses an execution procedure will be inevitable (Photo: ShutterStock)

"On the day they announced the closure, the banks stopped all business activity in the industry"

Another customer of Zaig is D. from the center of the country, who owns a medium-sized business that imports food products.

When the restaurants and hotels stopped operating, D. was forced to destroy tons of produce, while his customers canceled checks and transactions and called on him to come and collect goods that had already been sold.

"On the day they announced the closure, the banks stopped all business activity in the industry and all related businesses. The banks dropped an order not to touch restaurant checks. If I needed cash flow and had it in the form of deferred checks, I could do nothing about it. ".

D. was unable to obtain a state-guaranteed loan because his business is in a defined high-risk industry.

"A bottleneck was created. On the one hand, turnover dropped to zero and the banks did not allow future checks to be used; and on the other hand, my checks that were out at vendors continued as usual. I found myself without coverage. No state-guaranteed loan, nothing.

" Grants that I could not touch because a hole was created in the bank.

Any money that goes in there is swallowed up.

The banks took care of themselves ... we will be a circle here.

From there to execution and insolvency, the road was short.

"" When the banks started to press and I saw that the debts were large, I turned to the lawyer. "Execution knocked on our door, and there was a collapse here.

Who can handle such a thing?

Yes Corona, no Corona, it does not interest them.

Execution operated as usual.

They took my car at 12:00 at night, a vehicle used by me for work.

The option of knocking on my door every day and undermining the family's security is something I will not stand for.

There was no choice but to resort to this procedure, to stop the tsunami. "

"The corona came and whoever was on the verge of collapse - collapsed, but this is not the end"

Daf Hadash works to reduce the volume of consumer credit in Israel, to promote creative solutions that will enable quick debt relief, and to unite lawyers who are committed to an orderly agreement and fair and affordable prices.

Tomer Rabinovich, the association's general manager, believes that the corona is accelerating an 'explosion' of a difficult problem that Israeli society has been dragging for about a decade. "Before the corona, 40% of Israel's residents were in a chronic deficit.

We are a 'loan country,' "he says." The volume of loans has jumped in the last decade - NIS 200 billion a year that banks have distributed to households.

On average, every family in Israel borrowed NIS 100,000.

On the eve of the Corona, 700,000 people were in enforcement proceedings, and there were 20,000 new bankruptcies each year.

"The corona came. Whoever was on the verge of collapse - collapsed, but that's not the end," says Rabinovich.

"We are not seeing the big wave yet. The Bank of Israel expects it to arrive in March or May when the loan freeze is stopped, or in June when the lending period ends.

Those who repay loans will not be able to repay them.

The Ministry of Justice estimates that there will be about 70,000 new bankruptcies, and it is not prepared to deal with them. "

He said the state must act not to actively push citizens into insolvency." In insolvency, banks also do not see money, maybe 3% of debt after five years.

And yet, the state is paving them all for insolvency.

The required solution in such a situation is an arrangement.

Help people get there.

The state can not help everyone.

She needs to characterize.

Those who completely crash will go on the path of insolvency, those who do not need loans because they have savings or solutions - will get along.

The effort should be focused on those at the seam. "

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