This article will discuss the order to commence proceedings in an insolvency proceeding and its meaning.
In 2018, the new Insolvency Law was passed in the Knesset, replacing the Bankruptcy Ordinance. Therefore, some of the terms that may have been familiar before the change in law, have received new names.
The order to commence proceedings is the equivalent of what was called in old proceedings the “receiving order”, and it is given after the court accepts the position of the Insolvency Officer, who is the official government body overseeing insolvency proceedings (and will be called hereafter “the Officer”). A debtor is called “the individual” and creditors are called “creditors”.
The order is an important part of the insolvency proceeding, and it marks the beginning of the proceeding. It also marks the boundary between debts that will be included in the proceeding and ultimately erased at the end, versus debts that will not be erased – where any debt created before the order will be included in the debts to be erased, and any debt created afterwards will not be included. Therefore, the individual is also obligated not to incur new debts during the proceedings.
During the insolvency proceedings, none of the creditors have the right to take action against the individual personally, rather all proceedings will take place within the insolvency framework, under the supervision of the Officer, trustee and the court, and at the end the accrued money will be distributed to creditors proportionately.
The order will appoint a trustee on behalf of the court, who is responsible for investigating the individual’s assets on one hand, and also examining the creditors’ claims. For more on the trustee, his role and authorities – see another article from our firm.
Additionally, the order includes a stay of all proceedings against the individual in other frameworks, such as for example the Enforcement Bureau, and all liens imposed on him are canceled under the order. If the individual has a driver’s license restriction, it too will be canceled.
However, the order also outlines restrictions imposed on the individual. Upon issuance of the order, and throughout the proceedings, the individual will be restricted in many ways:
* The individual will not be able to obtain a new passport if his current one expires.
* The individual will not be able to exit Israel and an exit order will be imposed against him.
* The individual will not be able to issue cheque books or use checks.
* The individual will not be able to hold or use a credit card other than a debit card.
* The individual will not be able to incorporate a new company or participate in incorporating such a company without special court approval.
* The individual will be able to have a bank account but not go into overdraft.
Additionally, there are obligations imposed on the individual in the order to commence proceedings:
* The individual must appear before the trustee, Officer and court when asked to do so.
* The individual is obligated to pay the monthly payment set in the order to commence proceedings.
* The individual is obligated to submit bi-monthly reports to the trustee and Officer.
* The individual is obligated to cooperate in the trustee’s investigations.
If you would like to consult regarding an order to commence proceedings or insolvency proceedings, you can contact our firm which will provide professional and diligent advice regarding these proceedings, in which we specialize.