Bankruptcy of a sole trader in Israel or how to start all over again

A firm as well as an ordinary citizen can go through a bankruptcy procedure in Israel. An individual may be declared bankrupt if his debt exceeds 60 thousand shekels and the value of all tangible assets.

In general, the bankruptcy of the debtor is beneficial to both parties. For a person, this is a chance to start his financial life anew, instead of working for many years and perhaps all his life, to cover debts. Lenders receive at least some compensation for their losses here and now, and do not delay the payment of unpromising debt for years. To initiate bankruptcy proceedings can the debtor or his creditors. More information here.

What does the bankruptcy of a sole trader exactly involve?

You can say that by starting a bankruptcy procedure, you pay off only what you have today. This procedure takes place in several stages. First, an application is submitted to the court for the commencement of bankruptcy proceedings (“Bakas le pshitat regel”). Further, all the property of the debtor is seized by the court and a specially appointed manager (“Kones nehesim”) checks whether the debtor has not concealed anything, whether anything has not been taken abroad, whether there have been no other frauds. Here, it is important to take into account that the law also provides for restrictions on the withdrawal of property from a bankrupt, and all commissions, fines and other penalties on the part of creditors must be stopped and fixed (that is, finally, the debt snowball grows). In the end, all property is sold at an auction and, in order of priority the received money is distributed among the creditors. When everything is sold out and all possible repayments are made, the debtor receives a discharge in bankruptcy (“tav efter”) and from all restrictions imposed on him by creditors or the court in the bankruptcy process.

So, if you still have to go bankrupt, you should lawyer up for debts.

Firstly, the Israeli lawyer will analyze your situation and help you to close some of the debts before starting a bankruptcy case and with a big discount. Secondly, bankruptcy processes can usually last from several months to a couple of years (depending on the size of the debt, the liquidity of the property and many other factors). Thirdly, a number of financial and legal restrictions are imposed on the debtor by the court (including the item, that he is prohibited to travel to other countries). Finally, creditors can challenge court decisions on your bankruptcy (for example, to change the priority of their debts) and thus delay the process.

Competent legal support will assist to undergo the procedure as quickly as possible, with minimal losses and return to everyday life faster.