Insolvency?

There is another way out of debt

An amendment introduced into the Insolvency and Economic Rehabilitation Law allows debtors 4 months during which no collection proceedings will be instituted against them and all restrictions and foreclosures will be lifted, while they try to reach an agreement with the creditors.

Those who succeed prevent large economic losses, restrictions, exhausting bureaucracy and damage to reputation

Advocate Fares Jabili, in association with Zap Legal

03/05/2022

Tuesday, 03 May 2022, 07:50

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The phrase "bankrupt" has always had a harsh and negative connotation, almost equivalent to a curse.

A bankrupt is considered a failed person, who evades his debts, almost a criminal.

But in recent years there has been a shift in the attitude of the state, and consequently in society as a whole, towards debtors who are unable to repay their debts.

If in the past a person (or company) who got into debt had to go through a long and tedious process of bankruptcy, be completely financially restricted and receive a treatment of exclusion, then today the treatment is completely different.

In 2018, the Insolvency and Economic Rehabilitation Law was enacted, designed to regulate and consolidate all the laws and rulings pertaining to debts under one current and advanced law.

As part of the reform, a perceptual change was also made - the treatment of debtors changed from their perception as criminals evading paying their debts to be punished and denounced by society, to being treated as ordinary people who had an "economic accident", one that could happen to anyone.

Hence, they should not be punished but should be helped to rehabilitate, for their benefit and for the benefit of the entire public.

The new law has spawned economic rehabilitation proceedings, which are in real line for debtors as well as creditors.

This is a time-limited procedure (up to four years) that gives certainty to all parties involved and saves long and expensive procedures for the state.

Most debtors are confident that the only or ultimate solution for them is to conduct insolvency proceedings in order to get rid of their debts.

Although this is an important reform, it is still not a simple procedure that includes an investigation before a trustee appointed by the court, submission of monthly reports on income and expenses, production of documents and cooperation for about four years, when the debtor is subject to financial restrictions, complicated bureaucracy and stigma, even if Less.

Experience shows that few know that the new law includes additional tools for dealing with debts, and even fewer know how to use them correctly and effectively.

One of the most significant tools is the "formation of a creditors' arrangement", which allows, if managed professionally and correctly, to get rid of debts without entering into insolvency proceedings, for all that this implies, without the need to realize assets for creditors, without financial restrictions, and no less important - Without the stigma attached to those who go through insolvency proceedings.

A creditors' arrangement is an agreement between a debtor and his creditors, in which they decide together what will be the amount that the debtor will pay and under what conditions, and after the arrangement is in place, the debtor receives a waiver of all his debts.

An interesting amendment to the new law, compared to the old law (Bankruptcy Ordinance), is that today there is no need to offer a minimum amount equal to 30% of the debts under the creditors' arrangement.

That is, in the new law it is possible to formulate a creditors' arrangement for any amount that the debtor and his creditors will agree on.

Adv. Fares Jabili (Photo: PR)

Accelerated and less invasive procedure along with a quick dismissal

beyond saving time and money and maintaining reputation, creditors have a number of notable advantages:

- Amendment 4 to the Law of 2020 stipulates that during the period of negotiations to formulate a creditors' arrangement, That is, once the settlement process has begun, it is not possible to start and continue collection proceedings, and the debtor receives protection against foreclosure of bank accounts and salaries, realization of assets, vehicles, etc.

Since no order will be issued to open proceedings against a debtor who engages in a creditors' settlement proceeding, a trustee is not appointed but a functionary called a "settlement administrator," whose role is merely supervisory.

Accordingly, the powers of the administrator of the arrangement, including the powers of the debtor's investigation, are limited and limited in relation to a trustee appointed in an insolvency proceeding.

In addition, the debtor is not required to file monthly reports on his financial situation and income, and the procedure is not invasive as is the case in insolvency proceedings.

- In an ordinary insolvency proceeding, the debtor is required to produce a long list of documents regarding his financial situation, his income, the state of his assets, etc.

In a creditors 'settlement procedure, these requirements are limited in light of the fact that at the end of the day, the terms of the settlement are the result of the parties' agreements.

Compared to insolvency proceedings, in which there are clear restrictions on what can be done and what cannot, the terms of the creditors' settlement are written in accordance with the agreements of the parties (the debtor and the creditors).

For example, it is possible to enter into an agreement that the debtor will not be restricted, will be able to receive credit cards and checks, the delay in leaving the country against him will be canceled, and more.

- A creditors' arrangement allows the debtor to know with certainty what the exact amount he must pay in the procedure is, thus avoiding surprises and unforeseen occurrences.

In addition, the debtor is not exposed to claims and claims in relation to historical actions he has performed in the state of his assets and an examination of his business, past and present.

Creditors also get certainty that they know the amount they will receive under the creditors' arrangement.

A creditors' settlement procedure is possible for debts of more than NIS 150,000 and is done with the approval of the court.

It is important to know that for smaller debts there is a parallel procedure that can be performed against the Registrar of Execution.

Even in this procedure, when performed correctly from a legal point of view, it is possible to obtain dismissal and revocation of foreclosures and restrictions without the need to conduct an insolvency proceeding.

Our experience shows that when possible, it is worthwhile to try and take a creditors' settlement approach, which has many advantages over conducting an insolvency proceeding.

The value of the guaranteed certainty and the ability to avoid the realization of assets and economic restrictions, has no price.

Jabili Law Firm was established in 2013 and provides a comprehensive range of services and legal solutions customized to the client. The firm deals with, among other things, insolvency for companies and individuals, debt settlement and execution, representation in commercial and tort litigation cases

. -3089135 To

the firm's page on a legal website

Article courtesy of Zap Legal

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