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7 הקלות

7 Reliefs for insolvents during the COVID

From temporary exemption to the deferral of payments: In the wake of the crisis, employees and the self-employed who have become insolvent are entitled to a variety of reliefs; these are the notable ones

Adv. Ifat Ben David Bustos

Beyond the health consequences of the COVID, the economic effect of the crisis never ceases to amaze the world with its intensity. In the wake of the COVID crisis, hundreds of thousands of workers in Israel were fired from their jobs or put on unpaid leave. At the same time, thousands of businesses ran into serious difficulties and closed due to restrictions.

The difficult economic situation in which employees and the self-employed found themselves caused some of them to run up massive amounts of debt and led them to the brink of insolvency. However, in the current situation where many cannot generate income at all, it was clear to the state that those insolvents needed additional assistance.

Against this background, the authorities have acted since the beginning of the crisis to provide relief to insolvent employees and self-employed to help them get through it. In the following lines, we would like to present some of these reliefs: from a temporary exemption from the payment arrangement set for debtors to the postponement of the payments set for them.

Reduction of the amount of the monthly payment or temporary exemption
Reduction of the amount of the monthly payment or temporary exemption According to a temporary procedure established by the Commissioner of Insolvency Procedures, employees and the self-employed who have fallen into insolvency may apply to reduce the amount of the monthly payment imposed on them or receive a temporary exemption from the monthly payment obligation.
If an insolvent debtor is an employee, they may apply for an exemption if they are fired from their job, put on unpaid leave, or if their employment conditions were harmed due to the crisis. As far as self-employed debtors are concerned, they may apply if their business was harmed by the crisis.
Reception of COVID grants and unemployment benefits directly to the account
Another lifeline thrown at insolvent debtors was a determination that funds received as unemployment benefits or as aid grants due to the COVID (a grant for each citizen and a Passover grant) would be transferred directly to them, without being part of the repayment fund.
The implication: Insolvent debtors will not be able to use these funds to repay debts, and they will not be part of the creditors' fund.
Relief in investigative proceedings conducted against insolventsDuring the crisis, the Commissioner of Insolvency Procedures also issued guidelines regarding the investigative procedures of insolvent debtors. In this context, it was determined, for example, that it is possible to conduct an inquiry or investigation of debtors using technological devices (for example, through a video call), and the physical presence of the debtor is not required. At the same time, provisions were also exceptionally laid down concerning the holding of meetings for the approval of debt arrangements for debtors through technological devices.
Suspension of foreclosures and offsets by the Tax Authority
In the wake of the crisis, the tax authority – usually a powerful and aggressive creditor - changed its conduct towards insolvent taxpayers. Due to the crisis, the Authority is not taking aggressive and proactive action to collect debts from insolvents.
For example, no foreclosures are made on the assets of insolvent debtors, and no offsets are also made on funds that are owed to the Authority by debtors. The Authority has also ceased its requests to commence proceedings against taxpayers, and there is even a trend of tax refunds to lighten the load.
Possibility to request some of the severance pay for those who were fired
As part of another relief, insolvent debtors who were fired from their jobs during the crisis - and are unable to find work due to the situation - have been given the opportunity to go to the court where the proceedings are being conducted against them and apply for sums from the severance pay to which they are entitled, to be transferred, no questions asked, to the creditors' fund.
Possibility to hold an instant debit credit card
During the COVID crisis, the Supervisor of Banks ordered banks to allow insolvent debtors to hold an instant debit credit card (debit charge). This, without the need to obtain approval from the trustee in the proceeding. Also, insolvent debtors were given the option to join the banks' internet services and applications.
A memorandum of law designed to prevent debtors from reaching insolvency
Another relief that has not yet been given to debtors, but may be very dramatic, is being consolidated these days by the Ministry of Justice under a new law memorandum. Against the background of the fear of a flood of businesses that will reach insolvency in the wake of the crisis, a memorandum has been formulated to protect those businesses.

According to the memorandum, the court will be able to order the freezing of proceedings automatically for those businesses for three months, without first issuing an order to commence proceedings or appointing an official for them. At the same time, there will be a ban on withdrawing money and removing assets from the company.

Under the proposed outline, creditors' ability to initiate new proceedings against debtors who will meet certain conditions will be delayed.

In this way, the state hopes to prevent individuals and corporations that have run into difficulties during the COVID crisis from deteriorating towards insolvency. The goal is to "buy" those debtors time to get organized that will allow them to be rescued from the brink of the abyss. The new legislation is also supposed to include incentives designed to encourage debtors to reach settlement arrangements rather than resorting to insolvency proceedings.

In conclusion, during the COVID crisis, employees and the self-employed, who had reached the brink of insolvency, were given a host of significant reliefs designed to help them get through the crisis. A debtor who is considering how to act is advised to consult a skilled and experienced lawyer who will help them exhaust their rights.

משבר הקורונה - כך חוק חדלות פירעון החדש יעמיד אתכם על הרגליים

The COVID Crisis - This is how the new insolvency law will put you back on your feet

The Insolvency and Economic Rehabilitation Act, which went into effect in September last year, will help thousands of debtors deal with the consequences of the COVID crisis and embark on a new path.

Adv. Ifat Ben David Bustos

The COVID crisis in Israel has caused not only severe health damage but also enormous economic damage. Along with more than 1,700 deaths, more than 850 critically ill and more than 200 patients on respirators, as of this writing, the virus has also caused mass layoffs, and hundreds of thousands of unemployed and workers placed on unpaid leave, businesses have collapsed, and factories have closed, people have taken on many commitments such as loans to start a business, mortgages for the purpose of purchasing an apartment, and are now facing financial and cash flow difficulties, including mental stress that requires medical treatment, in order to adapt to the new reality.

Coincidentally, just before the crisis that rocked the lives of so many citizens, the legislature delivered good news to hundreds of thousands of debtors: the Insolvency and Economic Rehabilitation Law, which came into effect in September 2019 - about six months before the crisis - and created a new reality for debtors in the country.
The law, which has created a real change in insolvency law, gives debtors hope to settle their debts as quickly as possible and start a new life. In the following lines, I will seek to describe some of the arrangements established under the law, which will affect debtors who have run into difficulties during the COVID crisis.

Rehabilitation and financial education for those affected by the crisis

The new law exhibits tolerance towards those who were economically harmed in the COVID crisis, first and foremost due to its terminology, which has created a revolution in the field of insolvency. For the first time, the legislature treats insolvent debtors as those who have been caught in a kind of "economic car accident" caused by no fault of their own - instead of being labeled as bankrupt.

The law repeatedly reiterates the need for rehabilitation of the "individual" (the new definition for the "debtor" in the law) and expresses a perception that there is an urgent need to promote their integration into the fabric of economic life - an issue that comes even more into focus in the days of COVID.

The legislature assumes that a person in large debts will encounter many barriers, for example, due to their inability to hold a credit card, inability to manage a bank account, inability to go abroad, run a business or integrate into the labor market, and the legislature did not want to leave people "by the wayside" to live "off the radar" and therefore offers a comprehensive solution using the tool of "insolvency" with the primary purpose being their economic rehabilitation and reintegration into the fabric of economic life.

One of the ways in which the legislature takes active action to rehabilitate the individual is to oblige them to undergo financial education training (a kind of "traffic school" for debtors) to prevent them from repeating the same financial mistakes that led them to fall into debt in the first place.

Special consideration for the debtor's situation during the COVID period

The amount of the monthly payment order imposed on the individual in insolvency proceedings is determined after a comprehensive examination that takes into account the person's condition, i.e., the legislature ensured that the person's condition is taken into account before determining the monthly amount they will have to bear monthly until the discharge while taking into account their age, personal condition, health condition, whether they have small children in their custody or, God forbid, unhealthy family members, whom they must support - all these parameters are taken into account, and the amount they must pay by the end of the procedure is weighted according to those parameters.
COVID is considered a material change of circumstances that dominates the entire economy and is especially difficult for insolvents. In the first COVID wave, all debtors were given sweeping relief and were granted a postponement of the payment order for the months of March and April since the situation could not be anticipated at all. In the current COVID wave, the commissioner continues the trend of regard for individuals and economic difficulties and examines each case individually while showing compassion for the debtor's situation and taking into account all the parameters listed above in order to make a decision to reduce the payment order - each case will be examined carefully with the aim of making it as easy as possible for the individuals - each one according to their circumstances.

Did you collapse during COVID? In 4 years, you can shake it off

Another element that can generate hope for those who collapsed economically during the COVID period is how the new law tries to show them the "light at the end of the tunnel." Under the law, the legislature set, for the first time, a defined period of a maximum of four years, after which the debtor will receive a full discharge from their debts.
Every debtor knows that at the end of this period, and perhaps even earlier, their rehabilitation process will end, and they will be able to make a fresh start. It should be emphasized that according to the law, a discharge can be obtained within four years only if the debtor acted in good faith and did not try to take advantage of the legal proceedings against him.
If you have low debts, you will not go to court
Debtors who have run into difficulties during the COVID crisis will be surprised to find that proceedings against them will not necessarily be conducted in court. In the new law, the conducting of a large part of the proceedings was transferred from the court to administrative bodies. The goal: to shorten the procedures and reduce the bureaucratic burden on debtors, and also, as stated, to reduce the negative stigma towards them.
Under the new law, it was stipulated that insolvency proceedings in applications by debtors with debts of less than NIS 150,000 will be conducted in full before the Registrar of Execution and not in court.
The Magistrates' Court will hear cases of debtors with a higher volume of debts. In contrast, the district court, which has previously dealt with insolvency proceedings of individuals and corporations, will discuss only the cases of corporations.
Under the law, an attempt was also made to direct debtors out of bankruptcy proceedings by setting a higher threshold of debts than was previously customary. Only those with debts of NIS 50,000 or more will be able to file for bankruptcy, compared to NIS 17,000 in the past.

COVID may help prove good faith on the way to discharge

Those who have run into difficulties during the COVID period will probably gain more understanding concerning their situation, and it will be easier for them to claim that they acted in good faith.
The new law goes a long way towards debtors but makes a distinction between those who acted in good faith and those who acted in bad faith, and thus risk not receiving a discharge and incurring high expenses.
The one who determines whether a debtor acted in good faith or tried to take advantage of the proceeding is the Insolvency Proceedings Commissioner, formerly known as the "Official Receiver," and his primary role is to protect the public interest. For this purpose, he has been given criminal enforcement powers, and among other things, he may appoint investigators who will investigate offenses such as concealing assets, providing false information, and more.
Not only debtors but also small creditors benefit from the law
Under the law, the legislature seeks to protect not only debtors but also small creditors. Under the law, a mechanism was established that would increase the share of small creditors in distributing the money left in the fund from the debtor's assets.

In conclusion, the new insolvency law brings with it important good news, which may help debtors, especially in the COVID period. The debtor can finally see the light at the end of the tunnel and receive - assuming everything went well - the long-awaited discharge within a maximum period of four years.

חוק חדלות פירעון ושיקום כלכלי – ראשיתו של עידן חדש לחייבים

Insolvency and Economic Rehabilitation Law - The Beginning of a New Era for Debtors

By: Adv. Ifat Ben David Bustos

In this article, I will present the basic concepts in the insolvency proceedings, the stages of the proceedings for individuals and corporations, the essence of the law, its purposes, and the benefits it has brought with it for the debtors.
We are in a very unusual situation, daily dealing with difficulties, unemployment, hundreds of debtors took loans to settle debts, and it seems that there is still a long way for them to recover and integrate into the economic fabric of life; here, the legislature came in and brought with it good news for the debtors, which gives them hope to get out of debt and start a new life.
On September 15, 2019, the Insolvency and Economic Rehabilitation Law, 5778 - 2018, entered into effect.
Insolvency is an economic event, involving several factors, that requires answers to questions of economy and value. Insolvency law is intended to establish arrangements that will balance the interests, the parties involved, the creditors, the debtors, and the general public interest. The Insolvency Law creates incentives that will help debtors settle their debts as early as possible and embark on a new path. Until the reform of insolvency law and the entry into effect of the Insolvency Law, the law was based on archaic mandatory ordinances (Bankruptcy Ordinance (new version) 5780 - 1980, and the Companies Ordinance (new version) 5743 - 1983).

The essence of the reform and the purpose of the new law is modern legislation that will create fast and efficient procedures and reduce the bureaucracy that exists until the entry into effect of this law. The law defines a system of balances in the procedure between the best interest of creditors and the best interest of the debtor and establishes a single constitutional framework that will include the two types of debtors: individuals and corporations.

A person who has become entangled in large debts needs the help of the legislature to get a "time-out" from their debts. When the debts are too great or when the person fails to reach an agreement with his creditors, the legislature offers a solution to that person, and at the end of the day, they will get rid of their debts so that they can, after several years, integrate into the economy and live with dignity.
The legislature has changed the terminology of bankruptcy through the reform of the Insolvency Law, and the common terminology is "economic car accident" and not "bankruptcy," "debtor" will henceforth be called "individual," and the trustee is the one to fill roles such as "special administrator", "temporary liquidator" And "permanent liquidator" as well as the role of "creditors' arrangement manager."

Objectives of the law:

The first goal set by the law is to bring about the economic rehabilitation of the individual.
The second goal is to promote the individual's integration into the fabric of economic life. A person in large debts encounters many barriers, cannot integrate into the labor market or run a business, hold a credit card or manage a bank account, and other difficult and stressful restrictions on the individual's daily life.
The third goal is to boost the repayment rate to creditors by incentivizing debtors to act in good faith, report truthfully on their income and assets, and report on assets they have transferred. An individual who acts in good faith will achieve discharge at the end of the day. Another way to boost debt repayment is to establish a monthly payment by monthly payment orders - these are determined by value and moral standards, including the debtor's age, health, dependents, and more, taking exceptional circumstances (such as a family member's illness) into account.
The fourth goal is to increase the certainty and stability of the law, shorten procedures, and reduce the bureaucratic burden. The permanent arrangements in the existing law are outdated and not adapted to modern reality. The Insolvency Law seeks to amend and regulate the entire insolvency procedure clearly and chronologically. This is in order to enshrine clear arrangements in legislation, which will give the market stability and enable its development within a stable legislative framework.

The essence of the reform in insolvency law

The Insolvency Law is intended to amend the situation described above and to provide the Israeli economy with modern legislation in this area.
Along with the regulation of the substantive law, the law presents a structural change in the authorities trusted in the implementation of the law: the courts, the official receiver, and the enforcement and collection authority. This is in order to create fast and efficient procedures and reduce the existing bureaucracy in the field.
The objectives of the insolvency laws for individuals and corporations are not the same; the laws that apply to individuals give more weight to the rehabilitation of the debtor and their integration into the fabric of economic life while maintaining their dignity. The differences between an individual debtor and a corporation affect the structure of the proceedings and the balances that must be made in the proceedings between the best interest of the creditors and the best interest of the debtor.

Debt arrangement in insolvency law

A debt arrangement is a legal event that changes the debt terms of a debtor towards his creditors where the change is in favor of the debtor. A debt arrangement allows a corporation, individual or political entity, which is in financial distress to renegotiate the terms of their debts in order to improve their liquidity situation or to return to a state of liquidity so that they can continue their normal activities.

A debt arrangement differs from an insolvency proceeding in that it is more contractual - instead of the imposition on all debt holders, which characterizes insolvency proceedings, there is a contractual agreement between the creditors and the debtor to reduce the debt rate. In such cases, the debt arrangement is conducted out of court. However, even debt arrangements can fall under insolvency law. This, in any case where there is a certain imposition on creditors who opposed the arrangement (this requires the consent of a special majority of the creditors and the approval of a court).

In a debt arrangement, the damage to debtors and creditors is usually lower than in an insolvency proceeding and therefore serves as a preferable alternative. The main costs to debtors associated with debt arrangements are the time and effort required in bargaining with the bank, creditors, suppliers, and tax authorities. Debt arrangement usually involves the reduction of the debt and the extension of the terms of payment.

Converting debt to share capital

In certain debt arrangements, mainly of bonds issued by public companies whose shares are traded, the bondholders may agree to cancel part of the debt, or in rare cases its entirety, in exchange for receiving part of the company's share capital. Such transactions occur when large corporations run into severe financial distress, in a situation where the company's debts in relation to its assets are so large that creditors have no advantage in trying to refer the company to insolvency proceedings, in which the debt repayment rate is relatively low, and the company does not have the means to pay the debt even by way of debt restructuring. These debt arrangements may sometimes end in the takeover of the company by the bondholders, and they continue to operate as a "living business" (a business that is not in danger of insolvency in the near future). As a result, the part of the original shareholders is diluted and sometimes even deleted altogether.

Insolvency proceedings in respect of an individual

Conducting Insolvency Proceedings Regarding a debtor who is an individual - the third part of the Insolvency Law, and the guideline of this section is the view of the insolvency proceedings of an individual as proceedings in which the debtor's rehabilitation is a central purpose. The structure of the procedure is aimed at achieving this purpose.
The main innovation in this section is the transfer of the conducting of a large part of the proceedings from the court to administrative bodies. Insolvency proceedings in applications by debtors with debts of up to NIS 150,000 will be conducted entirely before the Registrar of Execution and not in court. In other proceedings, the commissioner will be responsible for the day-to-day conducting of insolvency proceedings.

Another major innovation is in the structure of the proceedings. The insolvency procedure of an individual will be divided into two periods:
First period: a period of examination during which the debtor's financial situation and conduct before and during the proceedings will be examined. This period will begin with the issuance of the order to commence the proceedings, during which time the proceedings on the individual will be frozen.
Second period: At the end of the examination period, a rehabilitation plan will be determined for the individual, upon completion of which the individual will be relieved of their obligations. If an individual has no ability to pay his creditors, he will be relieved of his debts immediately - "immediate discharge."
The rehabilitation plan includes provisions regarding the management of the individual's assets and their realization, if necessary, the periodic payments they must pay and instructions regarding the operation of their business (if such exists). As part of the rehabilitation plan, it will be possible to stipulate that the individual must participate in an economic training program.
There are criteria for applying for an order to commence proceedings, and these are specified in the law, the first of which is the duty of good faith; if it turns out that the application was submitted in bad faith, the applicant will be charged with legal costs. The application will be accompanied by an affidavit from the debtor and any other document required by the minister; also, a copy of the application will be forwarded to the commissioner; if the submitter is a creditor, a copy will also be forwarded to the corporation.

Until the order to open proceedings is received, the applicant may apply for interim relief, at the discretion of the court after examining the material in their possession, and the hearing will take place in the presence of both parties, or only one party, if the court is convinced that "There is a reasonable suspicion that delaying the hearing until it takes place in the presence of the parties will thwart the granting of relief or cause serious harm to the applicant. "(section 18 of the Insolvency Law).

Company recovery, insolvency arrangements

Recovery is an insolvency proceeding applicable to corporations at the end of which the corporation continues to exist. Instead of distributing to the creditors the consideration for the assets as it is, as was done in the liquidation, the creditors receive new rights towards the corporation, instead of the rights they had on the eve of the proceedings. Along with this legal change, it is customary that the corporation will also undergo a process of economic recovery, the primary purpose of which is to eliminate unprofitable activities and focus on areas of activity (existing or new) that will allow the corporation to return and earn in the future.

In Israel, the corporate recovery model, which was first established in section 233 of the Companies Ordinance and moved to section 350 of the Companies Law, is greatly influenced by the American model. Practices such as the issuance of a freezing order in the presence of a single party and the management of the company without a trustee (while the existing management remains in office) during the freeze period are routine in the United States. They are contrary to what was customary in Israel before the advent of the recovery approach (for example, in a company in liquidation - there will always be a liquidator). The main idea is to allow the company to recover, maintain its enterprise, employees, and property, and arrange the repayment of debts to creditors by way of an arrangement instead of realizing assets. Many companies will yield a greater return to all interested parties (primarily to creditors) if they continue to operate, or sell or merge into another company, as a "living business." The sale of the company's assets separately (as was done in the liquidation) tends to lose the added value that the company creates as a whole. Of course, sometimes a company has no chance of recovery, and the right way for it is liquidation, but the possibility of recovery must be examined before deciding on liquidation. Nowadays, large insolvent companies are almost always redirected to recovery.
A standard recovery procedure opens with the submission of a request for a stay of proceedings. A stay of proceedings means that it will not be possible to continue or initiate any proceedings against the company except with the permission of the court and the conditions to be determined by it; In order for the court to accept the application, it must be convinced that in this proceeding there will be a benefit to the company and on the other hand the interest of the creditors will not be harmed. That is, freezing proceedings is the opening shot for a recovery procedure. The freezing order can be issued in the presence of one party (usually, the debtor company itself), but if given in this way, the court must hold a hearing in the presence of the parties as soon as possible and no later than 14 days from the date of the order. Freezing proceedings is a more substantial relief than delaying proceedings (which exists in the other two types of insolvency proceedings). In the freezing, even the secured creditors (mortgage holders) cannot exercise their security. The law tips the scales towards the rehabilitation of the company and reduces the rights of creditors. However, if the freezing of proceedings has harmed them, the secured creditors may seek adequate protection for their security.

The court may appoint an official (trustee) who will have the powers to be determined by the court, including the management of the company or the supervision of its management. The trustee is equivalent to a liquidator or a trustee in bankruptcy. It is his duty to act in accordance with the instructions of the court. If a trustee is not appointed, the company itself becomes the holder of the same powers and duties as a trustee. In this situation, the company is a "holder debtor."

The recovery plan is at the heart of the recovery process. The main problem in formulating a recovery plan is the valuation of the company (Valuation): it is known what the scope of the company's liabilities is, but the actual value of its assets is unknown, when it is capitalized for a future scenario of successful recovery. The creditors' rights in the recovery process are derived from the value of the company's assets, determined in the valuation process.

As a rule, the plan must be submitted together with the request for a stay of proceedings, but if the court has granted an extension, it can be submitted up to 120 days before the date set for the end of the stay of proceedings. The recovery plan has two parts: One is an economic-business part, which details how the company intends to reorganize its activities so that it will recover successfully. The other is the legal part, which details the changes in the rights of creditors (as well as shareholders) towards the company. The deeper the company is in insolvency (the more negative its equity), the higher the percentage of the company's share capital the creditors will receive. Usually, the recovery plan is formulated by the trustee in consultation with the creditors - after all, they are the ones who will decide.
Once the recovery plan has been announced to creditors, creditors' meetings will be convened to decide if they wish to accept the plan. The decision at the creditors' meeting must be made by a majority of 75% of the value of claims represented in the vote. All creditors' meetings must approve the plan. However, even if the plan was not accepted at the meeting of a particular group, the court may approve the plan by forcing it on that group if several cumulative conditions are met:

• Most of the value represented at all meetings together voted in favor of the plan;
• The plan is fair and just to that objecting group of creditors;
• The same group would not have received a higher consideration in the alternative of liquidating the company;

Note: If the group is of secured creditors, the plan stipulates that they will be immediately paid the value of the secured debt or deferred payments in the value of the secured debt. All creditors from the objecting groups will be entitled to receive their full share, while if this condition is not met, the shareholders of the company will receive nothing.
Moreover, the court is required not to approve a recovery plan at all if even a single objecting creditor will receive, under the plan, less than he would have received in the alternative of liquidating the company. The distribution of creditors to the various meetings is done according to the existence of the same or very similar economic interest among all the creditors in the group. Typically, this means convening a meeting of secured creditors and a separate meeting of unsecured creditors, while a shareholders' meeting is also possible.
Once the recovery plan has been approved at the creditors' meetings, the court may approve or reject it. The court determines this according to the degree of fairness and applicability of the plan. The court will show a strong tendency to approve a plan that has been approved by the creditors' meetings. If the plan is approved, then its legal part is from now on binding all the company's creditors (or those creditors determined in the plan).
Approval of the recovery plan is the finish line of the insolvency proceedings. After that, the company returns to operate within the framework of general civil law. This, of course, goes hand in hand with the actions required by the recovery plan, except that the plan can be carried out under the ordinary laws of enforcing rulings against a person eligible for repayment.

Recovery can be conducted in the form of internal recovery (discussed above) or external recovery. In external recovery, the company's assets or shares of the company are transferred to a third party, which was not previously associated with the company. This party (the buyer) pays for the shares or assets; The payment is transferred to the procedure fund and distributed to creditors. In return, the original debts are written off, and the buyer gains a debt-free company. Alternatively, the buyer himself becomes a long-term side to the recovery plan, thus creating a relationship between himself and the original creditors.
Occasionally, the recovery procedure takes place out of court. The debtor and the creditors prepare an arrangement, which determines the new rights that the creditors will have towards the debtor. There is no impediment to a person waiving, with his full consent, part of the debt towards him. If 100% of the creditors have agreed to change the terms of the debt towards them, there is no need to go to court, as a pure contractual process has taken place. Such consent is called a debt arrangement. Theoretically, it does not belong to the insolvency law.
However, sometimes the consent of 100% of the creditors is not obtained. In such a case, once the creditors' arrangement is ready, the procedure goes through the court, on one point: bringing the plan to the court's approval, so that it will bind 100% of all creditors, even those who did not agree or did not respond to the arrangement proposal. As in a typical recovery procedure, the arrangement must be approved at creditors' meetings under section 350(i) of the Companies Act. Of course, the court is required to examine the degree of justice and applicability in the proposed arrangement. In such arrangements, there is no need to suspend proceedings, and usually, no official will be appointed on behalf of the court. Of the classic stages of the insolvency proceedings, only the stage of distribution of assets takes place, that is, the application of the new rights towards the debtor.

In conclusion, it seems that the reform has brought great news to debtors who will finally be able to see the light at the end of the tunnel in a shorter time than was the case in previous laws and at most within four years, assuming everything goes well, the debtor could receive the awaited discharge.
I would be happy to help anyone who feels that they have fallen into insolvency or is afraid that they are about to fall into insolvency.
You can contact me or leave your details, and I will get back to you as soon as possible.

פשיטת הרגל הגדולה ביותר בתולדות המדינה

The largest bankruptcy in the history of Israel

By: Adv. Ifat Ben David Bustos

Eliezer Fishman is an Israeli businessman who formerly owned many companies in the fields of communications and real estate in Israel and around the world.
In August 2016, the Tax Authority applied to declare Fishman bankrupt for a debt exceeding NIS 196 million to the income tax and to realize the Fishman Group's assets and Eliezer Fishman's assets to cover the debt. In December 2016, the court issued an order to confiscate Fishman's assets, and in June 2017, he was declared bankrupt.

In Forbes Israel's list of Israel's 100 richest people for 2013, Fishman was ranked 40th with a fortune of NIS 2.7 billion. At the beginning of 2015, TheMarker website estimated that Fishman's personal debts outweighed his assets by more than NIS 1 billion.
Over the years, Fishman had acquired many businesses as part of the Fishman Group under his control, using bank loans and business leveraging. There is a reason it was said that "the man who invented the bank leveraging, which pays hundreds of millions of shekels to banks every year, interest on his debts, and it is said that all bank managers in Israel check on his health every morning and breathe a sigh of relief to find that he is well" (Aryeh Avnery, "Maariv" newspaper, 2015).

The Fishman Group had holdings in many areas, including retail, mass communications, industry, communications, real estate, and more. The group has businesses in Israel and abroad. Some of the companies in the group were wholly-owned, and some were partially owned (including public companies).

The debt arrangement of Fishman's companies

The Fishman Group has had many debts over the years. However, several events increased the debt balance on the one hand and weakened the collateral on the other.
In 2006, Fishman lost about $400 million in gambling on the Turkish lira.
The sanctions on Russia from 2014 hurt the value of the Fishman Group's investments in Russia and adversely affected Jerusalem Economy Ltd.'s cash flow.
Over the years, the banks have conducted various processes with Fishman to maximize the debt; however, this had not usually reached the court. In November 2015, it was estimated that Fishman's private companies owed NIS 2 billion to Bank Leumi and a similar amount to Bank Hapoalim, and the banks had securities for only a small portion of the debt.
In a long-running legal dispute between the Tax Authority and Fishman, a peremptory rule in 2016 ruled that the companies must pay a tax liability of approximately NIS 196 million. In August 2016, the Tax Authority submitted a request to declare Fishman bankrupt due to the debt, which exceeded NIS 196 million, and to realize the assets of the Fishman Group and the assets of Eliezer Fishman to cover the debt. At the same time, several banks requested to join the bankruptcy hearing regarding debts in excess of the amount of the debt to the Tax Authority.
In January 2017, a report was submitted to the President of the Tel Aviv District Court, Eitan Orenstein, regarding the state of Fishman's assets and his business group, which included more than 120 companies in Israel and other countries. The special administrator appointed to manage Fishman's assets said: "This is the largest bankruptcy in the history of Israel." According to the report, the Fishman Group had evidence of debt amounting to about NIS 4 billion.

After a struggle between the special director and lengthy negotiations, an arrangement was reached between the special director and Fishman and his family, but the agreement was rescinded after Bank Hapoalim and other creditors voted against it at the creditors' meeting. As a result, Fishman was declared bankrupt, and his family members' liability is open to legal proceedings.

Analysis of the debt arrangements of the Fishman Group

Among all the conflicting interests in the debt arrangement of businessman Eliezer Fishman, there was also a discussion in principle between the Supervisor of Banks, Hedva Bar, and the banks to which Fishman owes about NIS 3.5 billion. At the center of the discussion is the question of what a bank should consider when deciding what to prefer - a debt arrangement, i.e., a "haircut," or turning to more aggressive collection methods towards the debtor.
According to the banks, the role of the bank is to maximize repayment. That is, the preferred option is the one in which Fishman returns as much money as possible. On the other hand, the Supervisor of Banks thinks that the equation should also include the pricing of public trust. That is, the option under which public confidence in the banking system will grow is preferred.
Apparently, simple logic tends in favor of the banks' position because the role of the bank is, among other things, to collect the debts from the debtors, as much as it can. By the banks' logic, if they make every effort to collect the maximum debt, public confidence in the system will be strengthened anyway.

A more complex look will tip the scales in favor of supervision of the banks in the long run, as Fishman's case cannot be examined in isolation from other cases. The Supervisor treats the system as being in a replay situation: Fishman had debts relieved today, Motti Zisser did it yesterday, Nochi Dankner and Lev Leviev did it before him, and tomorrow there will be another person who benefits from debt relief because that's how the system works - not all loans are repaid. Therefore, according to Bar, the deterrence that the system will create through Fishman towards future borrowers is of economic value since the deterrence will cause future borrowers to strive in advance to repay the loan because they know that aggressive means of collection are an option. It will also show the public - who see how harsh measures are used in collecting from small borrowers while leniency is practiced with large borrowers - that there is another way. The system needs to price this value.

True, some would call the return of trust in the system in this way as pettiness. Others will say that a system that chooses this path does so only because of the headlines in the papers. But that is not the case. Creating standards set by banks and other lenders for repayment of debts - standards that borrowers are familiar with before they get into a situation where they cannot repay their debts - is essential.

Banks may think that their role is limited to a statistical analysis of the maximum collection option. But the truth is that those who think so are bankers who have not yet realized that the abominable model of entering a closed room with a borrower and concluding matters in private is not a model that does not improve public trust, and like other models in banking - its time has passed.