In this article we will discuss an insolvency application – an application filed by a person with debts, called an “individual” in legal terms, in which he requests to commence insolvency proceedings – what was previously called bankruptcy, for someone with debts up to 150,000 NIS. Those owed the money are called “creditors” in legal terms.
Someone with debts under 150,000 NIS must file the application at the Enforcement Bureau, with the amount examined according to current debts – usually, if there are enforcement files, even if the amount was lower when originally submitted, often the total amount at the Enforcement Bureau must be checked.
The application can be filed by an individual with debts exceeding 53,745.48 NIS, and under 150,000 NIS. Under certain circumstances an application can be filed by someone with debts up to 161,236.45 NIS.
The difference between this application and one filed with the Magistrate’s Court is significant. First, the proceedings take place at the Enforcement Bureau, which is an instance that can be managed relatively easily compared to courts since legal procedures there are simpler. However, the actual proceeding also differs significantly from those at the Magistrate’s Court. First, the proceedings open with an attempt to arrange the debts based on the assumption that with lower amounts, there is potential for compromise. This is a short proceeding, essentially meant to offer a payment arrangement for the debts, meaning consent needs to be obtained from all or some of the creditors for the offer, or – under exceptional circumstances – authority to approve it without consent must be registered. If all these fail, the proceedings will become “regular” insolvency proceedings handled at the Enforcement Bureau instead of the Magistrate’s Court.
The proceedings commence by filing this application to open such proceedings, with the detailed application relating to the individual’s debts, income and expenses and assets. Additionally, the application must include a proposal to formulate a payment arrangement to pay the debts.
After submitting the application, the enforcement registrar will request information from several entities, for example: the registrar of pledges, National Insurance, land tax authority and licensing authority, in order to check the individual does not have assets he is trying to conceal.
Subsequently, the enforcement registrar will set a date for a creditors’ meeting where the payment arrangement will be brought before the creditors. More details on the meeting and criteria for approving the creditors’ arrangement can be read in this separate article.
If the creditors’ arrangement is approved at the creditors’ meeting according to the criteria, an order will be issued making the arrangement binding, and after the arrangement is fulfilled – a discharge order will be issued, effectively erasing the remaining debts that were included in the proceedings.
If the offer is not approved at the creditors’ meeting, the proceedings will move into regular insolvency proceedings, handled at the Enforcement Bureau instead of the Magistrate’s Court, with the individual entitled to request at any stage that the file be transferred to the Magistrate’s Court. The proceedings will be conducted like those at the Magistrate’s Court, however the Insolvency Officer – the official government body overseeing insolvency proceedings – will have less involvement in the proceedings.
In order to offer an arrangement and speak with creditors and reach agreements, it is very important to consult a specialized insolvency attorney. To schedule a free consultation today, contact our firm.