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And that’s not all – because from the moment an enforcement case is opened against you, the creditor can also impose liens on your bank account, your salary, come to your home and impose other unwanted and unpleasant restrictions such as delaying your departure from the country, and so on.
It is important to understand that foreclosures and restrictions are imposed according to the rules set forth in the law, and not according to an arbitrary decision by the bank or the registrar of the bankruptcy court. Therefore, it is important to deal with debts immediately – thereby saving many costs and avoiding foreclosures and additional heartache.
The simple solution is, of course, to negotiate with creditors and try to reduce the debts to an amount you can afford, but for this, an external source of financing is needed.
It is important to know that within the framework of such negotiations, it is sometimes possible to receive “haircuts” of tens of percent of the debt (depending on the case, of course), but according to most, creditors will agree to erase part of the debt only if they receive immediate payment of the settlement amount.
If you offer a payment plan, they will likely not agree to give you a discount at all, and may even prefer to continue with collection procedures.
The default of debt cancellation procedures. Insolvency proceedings (or by its old name – bankruptcy) are procedures designed to give a “second chance” to those who have gotten into debt in good faith, and are unable to pay their debts.
The procedure begins with a stay of proceedings – an order from the Insolvency Commissioner (Ministry of Justice) that halts all enforcement proceedings and lawsuits being filed against you, and ends with a discharge order , that is – an order that erases all debts you had at the beginning of the proceedings.
During the process, you will be required to regularly report your income and expenses, as well as pay a fixed monthly payment (derived from the household’s income and expenses, regardless of the amount of debt!). As part of the process, a court official will be appointed, whose job will be to locate assets you own, review the reports you have submitted, and recommend to the court how the process will proceed.
About a year later, a court hearing will be held, where a repayment plan will be determined for you , meaning it will be decided what amount you must pay to receive a discharge order.. It is important to know that, in most cases, they will not ask to sell your apartment or car (unless it is a luxury vehicle), but you will probably be required to pay the fund a portion of their value. Once you have paid the full amount of the repayment plan, you will be able to receive A discharge order will then be issued, and all debts will be permanently erased, except for alimony debts, fines, and debts created through fraud .
According to the Insolvency Law, the court may condition the repayment plan on participation in a financial rehabilitation process.
In certain cases, a comprehensive arrangement can be proposed under court supervision. This can be done as part of an insolvency proceeding or in a separate proceeding.
In such a case, if the majority of creditors (51% of the creditors, who have 75% of the amount of the debt) agree to the arrangement you proposed – the court will approve the arrangement, which means that all debts you had until the beginning of the procedure will be erased, just like in an insolvency procedure.
Consolidation of cases is a procedure in execution, intended to provide an interim solution to a debtor who cannot pay all of his debts immediately but requests a distribution over time.
As part of a case consolidation procedure, the debtor is assigned a fixed monthly payment, according to his abilities, and on the condition that the entire debt is settled within a maximum of 4 years (the maximum period varies according to the amount of the debt). In such a case, the debtor must deposit an amount of 3% of the debt at the beginning of the procedure, and usually all proceedings in the case will be delayed, as long as the debtor meets the monthly payment that was set for him. It is important to clarify that the debt in execution continues to accrue interest, and in fact grows day by day.
In the past, there was also the option of being declared a debtor with limited means, and then the debt could be spread over longer periods, but in September 2019, with the entry into force of the Insolvency Law, this option was eliminated (a mistake, in our opinion. We hope it will be corrected), and anyone who cannot pay the debt in the above-mentioned spread (up to 4 years) will automatically be referred to insolvency proceedings.
Of course, debts must be paid . But if it is not possible to pay all the debts, then there is no point in paying only some of them – because then the problem will not really be solved, but only postponed a bit – and it is better to try and find a comprehensive solution.
Therefore, just before paying, it is important to sit down and make a neat list of all the “open” debts we have, including loans, bank balances (minus), credit cards, outstanding checks, debts to family and friends, etc. If the amount is one that can be met, then it is worth raising the money and paying, but if not, then simply stop everything and do not pay anyone except as part of a comprehensive arrangement or through debt cancellation procedures (which we will expand on later…).
If we have come to the conclusion that we cannot meet our debts, it is very important to understand why this happened – people sometimes get into debt due to an unusual and one-time event, such as a family member’s illness, or a period of unemployment during which there was no ongoing income, but in most cases, the debts simply stem from improper financial management, and then it is important to understand the source of the problem – are our household expenses too high? Or maybe our business is not as profitable as we thought?
It is important to ask ourselves these questions, even if the answers are difficult, because if we understand the source of the problem, we can probably – with the right help – solve it. On the other hand, if we don’t solve it – the problem will probably get worse.
A debt problem is one that you shouldn’t try to solve on your own. Dealing with institutional creditors or the enforcement agency is very complex, and reaching financial balance is no easy task at all. The good news is that there are people who can help.
First of all, it is important to achieve financial balance, and to do this, it is advisable to receive financial guidance, which can be obtained for free (through associations such as Paamonim , Makimi, and others) or for a fee, through a family finance consultant. If you run an independent business and have doubts about its profitability – it is worth seeking the help of a business consultant, who can also be obtained for free through organizations such as MAT, MAOF, and others. On our partners page you can find a list of organizations that can help you achieve financial balance in your household.
The information on the “Fresh Start” website is general and non-binding, and is not necessarily the most up-to-date information. The information is not intended to replace legal, financial or other advice, and in any case – it is advisable to consult a lawyer before making decisions regarding debt matters!
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