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Are you considering an insolvency proceeding?

These are the considerations that are worth thinking about

This article is intended for anyone debating whether to enter into an insolvency and economic rehabilitation procedure.

In the article, we will explain what the procedure involves, what its benefits are and how the amount of the refund and the feasibility of the procedure can be assessed.

Tags

• Insolvency

• Debts

Adv. Sheri Zohar, in collaboration with Zap Legal

Sunday, 02 May 2021, 10:55 Updated: Thursday, 06 May 2021, 14:04

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Insolvency (Photo: ShutterStock)

We will begin and emphasize the main point, and that is, that an insolvency and economic rehabilitation procedure gives a person who has accumulated debts and has difficulty restoring them great peace of mind.

First, defining a person as insolvent makes it possible to freeze (in the vernacular) the enforcement proceedings against him, including foreclosures on his income and current account, as well as a limitation on renewing a driver's license, which mainly obscures the debtor's life and prevents him from conducting daily life. The

request for delay in execution proceedings can be submitted immediately after the request for insolvency proceedings has been received in the system, and the fee of NIS 1,590 has been paid. Thus, without the weight of the enforcement proceedings on his neck, the insolvent can breathe a sigh of relief and earn a decent living without fear. His income will be forfeited and he will not be allowed to pay the monthly repayment determined for him in the repayment plan.

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Why does the manner in which the payment order was determined also give peace of mind to the insolvency?

Anyone whose application to enter into an insolvency procedure has been approved, receives a payment order that allows him to return to his creditors as much as he really can.

That is, the monthly repayment to which he is liable is adjusted to his income, after deducting the subsistence expenses.

Throughout the repayment period he can be quiet and sure that he will have enough need for his day-to-day existence and that of those who depend on him, without accumulating new debts.

Is it possible to predict the duration of the insolvency proceedings?

The Insolvency and Economic Rehabilitation Law was enacted in 2019 and ensures insolvency peace of mind as well and perhaps mainly because it rates the procedure on time.

The whole procedure takes a maximum of 4 and a half years, and may sometimes end earlier

The Insolvency and Economic Rehabilitation Law was enacted in 2019 and ensures insolvency peace of mind as well and perhaps mainly because it rates the procedure on time.

The whole procedure takes a maximum of 4 and a half years, and may sometimes end earlier.

Within a period of up to 18 months from the moment of receipt of the application for an order to open a proceeding, a period during which the insolvency must comply with a monthly payment order, a court hearing is held in his case, in order to determine its final repayment plan.

That is, how much he will have to add and pay according to his abilities and assets, if any.

The final repayment plan determined in this hearing is limited to a period of up to an additional 3 years, at most, except in exceptional cases defined by law and case law.

At the end, after the amounts determined in the decisive hearing have been paid, the insolvency receives a full discharge for the balance of the debt, even if the balance of the debts "on paper" is a much higher amount.

All this of course subject to the insolvency of assets to be repaid from them.

Adv. Sari Zohar (Photo: PR)

How can I estimate in advance what the repayment amount of the repayment plan will be?

The monthly repayment determined for the debtor depends, as stated, on his income and the legitimate expenses of the family unit.

The person who determines the monthly payment until the final hearing in court is the insolvency commissioner.

A lawyer who is familiar with the pre-determined formula in the commissioner's procedures, as well as the case law that has accumulated in the last two years, will be able to assess from the data he will receive from the client what the payment order will be at the time of entry into the procedure.

For example, a single person (single without children) who earns NIS 8,000 net per month is expected to pay the convention fund NIS 2,300 per month and a total of 96,600,000 throughout the entire period, for 4.5 years (even if his debt was several hundred thousand shekels).

He must have a family with 2 minor children and earn NIS 8,000 net, however, while his spouse earns NIS 7,000, is expected to pay NIS 2,000 a month to the convention fund (and a total of NIS 84,000 for 4.5 years and regardless of the original debt).

And if one of the children is a toddler who goes to a daycare center for ages 1-4, the monthly payment is expected to drop to NIS 1,700 per month (about NIS 71,400 for a total of 4.5 years).

We will only note that in all examples, the repayment amount does not depend on the amount of the original debt, but it should be remembered that the repayment plan is determined in advance, subject to no change in the debtor's data, which is checked throughout the procedure, and that his monthly salary matches his abilities.

What is expected to be the payment order when both parents are defined as insolvent?

If we take the same example of a family unit that puts together NIS 15,000 a month, but in a situation where both parents are declared insolvent, then the repayment of both together is expected to be about NIS 3,800, if they have no toddlers, or about NIS 3,100, if any. They have one child in the daycare.

Each spouse has a separate fund and the distribution of the monthly repayment between them will be in proportion to the salary level of each of them separately.

What is the difference between the payment order and the full repayment plan?

Unlike the payment order, which is set by default at the beginning of the procedure, the final amount that the debtor must repay is adjusted to his ability and depends on the commissioner's and the court's view of the debtor's conduct in the procedure:

• Does he have "unnecessary" expenses?

• Did he properly report his income during the procedure?

• Are his expenses fixed or are they temporary or one-time (such as paying a lawyer for his services during the procedure, the age of the children beyond compulsory education), and then, at the end of them, can the monthly reimbursement amount be increased?

• Has he exhausted all possibilities to receive the income he deserves (such as receiving alimony due to the debtor from the father of her children)?

Therefore, it is very important that a lawyer knowledgeable in the field will accompany the debtor professionally and know how to anticipate and explain to the debtor all the consequences of how he conducts his life and during the procedure.

What are the additional considerations that guide the court in determining the repayment plan?

In the case of a debtor who does not exhaust the earning potential, it is very possible that the court will decide to extend the payment period of the repayment plan

In a hearing that takes place after the 12-18 months (at the end of the period of the payment order), the court examines not only the actual income, but also the earning potential of the insolvency within the procedure.

Thus, if, for example, the debtor earned NIS 10,000 net per month in the year preceding the proceeding, and now, at the time of the payment order, he earns only NIS 6,000 net, the court will want to examine what caused the decrease in income and whether it matches his earning potential.

In the case of a debtor who does not exhaust the earning potential, it is very possible that the court will decide to extend the repayment period of the repayment plan (beyond 3 years), and it is also possible that the commissioner will decide to increase the monthly repayment before the final hearing.

Moreover, if the debtor's wife, or the debtor himself, does not work for no justifiable reason, this too will be taken into account.

The plan will be determined on the basis of the potential salary of each of them, from which an additional payment to the fund will be derived.

How can you prepare in advance for such court considerations?

When you go to legal advice, try to give the lawyer the full details of you and your past and present income, so that his assessment is as consistent as possible with what will actually happen and you can make an informed decision whether you want to go into insolvency proceedings.

Moreover, a lawyer proficient in your data will be able to influence the Commissioner's decision and then the court's decision through well-founded reasons why the amount of reimbursement should be reduced in cases where the Commissioner's assessment is high and does not match the actual situation.

Are assets, pension funds and other social rights calculated in the repayment plan?

When the commissioner and then the court, determine the repayment plan at the end of the procedure, they also take into account the various assets of the debtor, such as the value of his home and the vehicle in his use and / or registered in his name. Although the debtor's pension money is protected from this, other social rights, such as a severance pay accrued due to past or present dismissal, study funds, or even inherited assets he received in the 7 years prior to the proceeding, are calculated as part of his income to determine the repayment plan. Similarly, monetary claims in which the debtor is the plaintiff (excluding bodily injuries and suffering) are part of the mass of assets that will be taken into account for the repayment of his debts.

In light of this, it is advisable to also check these data in advance, already in the initial consultation with the lawyer, before deciding the feasibility of entering an insolvency proceeding, as opposed to alternatives, such as, requesting full debt spread over a period of 3-4 years in each execution case, or examination The possibility of settlement with creditors for payment is reduced.

Attorney Sherry Zohar

Specializes in insolvency, bankruptcy and receivership proceedings and enforcement proceedings

It will be clarified that in this article, terminology in a familiar language (from the Bankruptcy Ordinance according to Rav) is deliberately used, which does not conform to the legal term under the new law.

( "The debtor" referred only in the new law, "show maturity" machine Order Restoration new law, "payment order" or monthly payments, called payment Atay new law "pulled procedure" referred to the interim period, law, etc.)

using the masculine form using the term must or stopped Pharaoh also refers to the female.

Phone

: 053-2472589

Article courtesy of Zap Legal The

information presented in the article does not constitute legal advice or a substitute for it and does not constitute a recommendation for taking proceedings or avoiding proceedings.

Anyone who relies on the information in the article does so at his own risk

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