This article will briefly discuss the economic recovery order given in insolvency proceedings (bankruptcy) in the Magistrate’s Court or at the Enforcement Bureau, the nature of the order, the considerations taken into account, and the consequences of the order.
The economic recovery order is given as part of insolvency proceedings, one to two years after the order to commence proceedings was given.
The order will set the terms that if fulfilled, will entitle the individual (the debtor) to a discharge – meaning, erasure of the remainder of his debts.
During this period, the trustee appointed by the court will gather documents and investigate the individual (debtor) regarding income, expenses, debts and also assets he has.
Towards the scheduled hearing, the trustee will submit a report called the “Findings of Review Report”, in which he will report to the court on the individual’s debts, the individual’s assets, the circumstances of the debts being created, and will also recommend a monthly payment going forward in the proceedings.
Afterwards, both the individual and the Insolvency Officer – the official body overseeing bankruptcy proceedings – have the right to respond to the report, and of course so do the creditors if they wish to do so. The responses and objections of all will be discussed at a court or enforcement hearing – depending on the instance where the file is being handled.
As part of the hearing, the court will examine compliance with the review order, and see whether the individual paid the payments fully and on time, whether he submitted the reports fully and on time, whether he committed other offenses prohibited in insolvency proceedings – for example, if he paid one of the creditors a debt during the proceedings – that is an offense. If additional debts were accumulated – that is an offense. If current child support was not paid – that is an offense.
In any of these cases the court may extend the payment period to be set under the economic recovery order, so that ultimately this translates to a very significant additional sum the individual will have to pay.
Within this framework, the court may also discuss the individual’s assets: for example, if during the proceeding a family member who left the individual an inheritance died, the individual can offer to redeem the inheritance for a certain amount, partial or full. He may offer to open certain pension savings plans or withdraw pension money in order to pay part of the debts in exchange for certain assets not being taken and sold, and more.
The monthly payment that will be set is one of the most important components of the order, besides assets that will be liquidated. It will affect the individual’s standard of living over the coming years, and therefore it is very important to come to this stage prepared and updated, with an understanding of what is at stake. Courts often tend to adopt the trustee and officer’s recommendations, and therefore much effort is required before the hearing date.
It is very important to be represented and aware of your rights before the start of proceedings and before the hearing and issuance of the economic recovery order, and therefore it is advisable to consult a specialized attorney in the field.