The legislator determined that requests for individual insolvency proceedings will be heard in the Magistrate's Court (Photo: ShutterStock)
The starting point is that a judgment regarding a financial claim is the last milestone in the legal process.
Upon the rendering of the verdict, the losing party must comply with the court's instructions in writing and verbally.
Many times, for one reason or another, debtors against whom judgments have been issued do not comply with the court's instructions and do not pay off the debts they have accumulated.
The king's way before the winner is to apply to the enforcement office, requesting the execution of a judgment and to take debt collection procedures against the debtor until the debt is paid.
At the same time, many times the debtor has many other financial debts and in practice it is not possible to take debt collection procedures against him since he is unable to pay all the debts at his disposal.
In other cases, debtors hide assets and money in order not to pay the financial debts they have accumulated so that the creditor has no other choice.
In this case, and as we will see in the article in question, the creditor has the option of turning to the competent court to hear a request to declare the debtor bankrupt.
In this way and through insolvency proceedings, it will be possible to reflect the true financial situation of the debtor and act to maximize debt collection using the assets and funds belonging to him.
What are the conditions for filing an application for insolvency proceedings against a debtor by a creditor?
A creditor who believes that it is not possible to collect the debt from the debtor in accordance with the provisions of the judgment, may, upon meeting the conditions detailed below, initiate insolvency proceedings through a collection
lawyer in accordance with the Insolvency and Economic Rehabilitation Law 2017-2018 (hereinafter: "the Law").
The debt is at least NIS 76,576. A financial debt lower than this value cannot be opened in insolvency proceedings. In this case, it is recommended to try to get the debt paid through other legal procedures through an enforcement office.
• A warning letter was sent to the debtor informing him that if he does not pay his debt, the creditor intends to open insolvency proceedings against him.
The debtor has 45 days from the date of receipt of the letter to repay his debt.
• The creditor must submit the request to open insolvency proceedings within three months from the date of delivery of the notice letter to the debtor.
• Insofar as it is a debt collection case that was opened against the debtor in execution, the creditor is entitled to open insolvency proceedings as long as the debtor was given a warning on behalf of the enforcement office and he did not pay his debt within the time specified in the warning notice.
• If the financial debt arises from a labor judgment, insolvency proceedings can be opened against the debtor as long as the amount of the debt is at least NIS 10,210 and the debtor has not repaid his debt within 30 days of receiving the judgment.
When should an insolvency procedure be used and when should an execution procedure be used to collect debts based on a judgment given in favor of a creditor?
To an untrained ear, the difference between insolvency proceedings and debt enforcement proceedings is thin and unclear.
From a legal point of view, there is a huge difference between the two procedures where in each procedure there are different goals, actions and results.
To the extent that the creditor believes that it is sufficient to take legal proceedings against the debtor as part of a debt collection procedure in execution, then the king's way is to act against him through these proceedings.
Taking a debt collection procedure in execution against a debtor will be effective when the debtor is able to meet the repayment of the debt, or alternatively when the creditor knows that if the debtor does not cooperate with the execution manager, it will be possible to take debt collection procedures against him and seize his money, property, assets and movables belonging to him for the purpose of disposal.
When there is a concern that the debtor's financial strength does not allow the debt to be paid off or that the debtor is hiding assets and cannot be acted upon as part of debt collection procedures in execution, it is possible, subject to the conditions set forth in the law, to submit a request to open insolvency proceedings against him.
Insolvency proceedings allow the creditor, through the person in charge of the proceedings, to collect and assemble all the assets and property of the debtor and through them to pay off and eliminate the debts he has accumulated.
How is a creditor's application submitted for insolvency proceedings against a debtor and which court is authorized to hear it?
A creditor who wishes to initiate insolvency proceedings against a debtor shall submit to the Magistrate's Court located at the debtor's place of residence or place of business an application form for the issuance of an order to initiate insolvency proceedings and shall attach the following documents to it:
• A signed affidavit by a collection lawyer verifying all the facts he presented in his application.
• Any relevant document that proves the amount of the debt and its very existence.
In this case, the judgment ordering the debtor to pay a sum of money must be attached, as well as the warning letter that was sent to him before the start of the legal process.
• As long as the application for issuing an order to open insolvency proceedings has not yet been submitted, the creditor has taken debt collection procedures against the debtor, it is necessary to detail and explain why it was not possible to complete the collection of the debt within the framework of these legal procedures.
To the extent that the request to open insolvency proceedings is submitted against a limited company that has a legal entity in itself, the request must be submitted to the district court located in the company's area of business, regardless of the amount of the debt.
A request to open insolvency proceedings against an individual who is not a company shall be submitted to the Magistrate's Court In the past, before the new insolvency law entered into force, all insolvency proceedings were heard in the district court regardless of the identity of the debtor or the amount of the debt.
Today, following the new law and out of a desire to relieve the courts kneeling under the burden of the hearing load as well as to relieve the debtors to whom the continuation of the proceedings naturally caused damage, the legislator determined that requests for individual insolvency proceedings will be heard in the Magistrate's Court.
Attorney Nissim Shopan specializes in filing financial claims and collecting debts and recurring checks and promissory notes for his clients for over 19 years with hundreds of proven successes. For contact and additional details, please contact us here or by phone - 072-3972351
The article is courtesy of Zap Legal
The information presented in the article does not constitute advice legal or a substitute for it and does not constitute a recommendation for taking procedures or avoiding procedures. Anyone who relies on the information appearing in the article does so at their own risk
Adv. Nissim Shopan, in collaboration with zap legal