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Bankruptcy in Israel

Bankruptcy in Israel is a complicated process. It includes but is not limited to; debt settlement, economic crisis, procedures, legal negotiations with the bank, financial and insolvency rehabilitation, and much more.

Debt Settlement

Suddenly, without any prior warning, you get a call from the bank clerk and find out that you’ve hit the bottom. There is no approval for transactions, there is no possibility of taking another loan and there is no way to return to the safe liquidity zone.

From this moment, everything starts to integrate quickly: businesses, organizations and companies that you were committed to pay to, start overloading with calls and letters and no income can save the situation. The obligation just continues to swell, until it reaches a situation where you are threatened with a request for enforcement or a lawsuit.

Economic Crisis

We all know the situation and are able to sympathize with it, and there is a good reason for this: senior economists estimate that 87% of the entire population in the State of Israel will fall into a similar economic crisis at least once in their lifetime and will have to mobilize suitable solutions for their situation.

Under the same figure, there are also many CEOs, company owners and businessmen, whose company was caught in a similar crisis. Now they have to deal with many debt collectors – from suppliers to the insurance company who tend to be much less patient when it comes to a company and not an individual.

Each creditor (the party owed to him) is legally entitled to act in several ways in order to receive his money.

In a situation where it involves the Law Enforcement and Collection System Authority and the court, it creates for the debtor a series of severe sanctions such as confiscation of the bank account and seizure of various assets, prevention of performing simple financial operations in the bank (limited debtor), delaying departure from the country, low credit rating, a “stain” that may impair From the debtor being able to get loans or approval for a mortgage in the future and difficulty in dealing with credit and insurance companies that check the associate’s background.

The state that understands that its residents are caught time and time again in a tricky situation, allows them to conduct a process that will eventually both manage to pay off their debt and open a new clean slate in order to rehabilitate and return to normal economic conduct. One of the best, immediate and most convenient solutions in this respect is debt settlement.

Debt Settlement Procedures

In the debt settlement process, the debtor and his creditor reach an agreement (drawn up in a written contract) according to which it will be decided how much of the total debt the debtor will be able to pay.

People who have accumulated piles of debt and have fallen into difficult financial pitfalls, will not really be able to pay off all the debt, even if they have to pay until their last day.

Similar to debt cancellation, the debt settlement agreement is created through the mediation of an expert and qualified lawyer – an educated professional who is very knowledgeable in this field, who can direct you to create a contractual agreement that will benefit your interests without you having to suffer a loss of property or pay an exorbitant amount that you cannot afford. A debt settlement lawyer will be able to explain to the creditors your abilities regarding the repayment of the debt – how much, when and by when and get their agreement or objection.

And what happens when the creditor objects to the agreement? In this situation it is possible to reach a legal hearing and you should know that the tendency of the courts is in any case to force the consent of the creditors to the agreement.

Legal Negotiations With The Bank

Usually, the organization who has to solve financial irregularities and financial disputes with is the bank, and that’s exactly where you’ll have to go with your lawyer. Negotiations regarding the agreement are conducted in front of a relevant representative and the goal is to find a solution to cover the large debt.

The more “bargaining cards” you have as debtors – the more your actual debt rate will be reduced. What is meant by? If you are still, despite everything, able to repay a relatively large part of the debt, there is a high chance that the bank will be happy to make a discount.

To produce such an arrangement not too many resources are needed, which makes the procedure, unlike bankruptcy for example, much cheaper and more profitable.

The debtor should strive to receive from the creditors a convenient payment framework with benefits such as a cash discount, reduced interest, convenient installments by direct debit, etc.

If you manage the negotiations with the bank correctly, you will create a positive lever in which they will want to reach out to you and reduce the debt rate. And when you cover your full debt according to the established agreement – the financial “leftovers” that you once owed will be deleted.

Financial and Insolvency Rehabilitation, Threshold Conditions

Filling an application to initiate proceedings is the first station the debtor must pass in the insolvency proceeding if he wishes to wipe the slate clean and be released from his debts.  

A debtor who wishes to file an application to initiate proceedings may file an application if one of the following conditions is fulfilled: 

  • On the date of filling the application or during the six months preceding it, the center of his life was in Israel.
  • On the date of filing the application he has assets in Israel or he is managing businesses in Israel.

 

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