Debt write-off - Best lawyers

The comprehensive information on this page, from LawReviews, is designed to provide you with a clear and updated legal picture in the field of insolvency and debt elimination in Israel. If you are dealing with heavy debts and cannot see the light at the end of the tunnel, you can find here the best lawyers for debt elimination - and understand in depth what legal options are available to you in order to achieve discharge and start a new path.

Introduction: When debts become an impossible burden

Dealing with debts is one of the most stressful and exhausting situations a person can experience. Incessant phone calls from creditors, warning letters, seizure of bank accounts and salaries, restrictions on driving licenses and travel bans from the country - all of these create a feeling of suffocation, helplessness and despair. Many people feel trapped in an endless cycle of swelling debts, with no realistic ability to ever pay them off.

It is precisely for these situations that the legal process of debt elimination is intended. It is important to understand: this is not a "trick" or a way to evade responsibility, but a legal right, anchored in Israeli law, whose purpose is twofold: on the one hand, to concentrate the debtor's assets and distribute them fairly among his creditors. On the other hand, and this is the main goal, to allow a debtor who got into difficulties in good faith to receive a "discharge" - that is, cancellation of the remainder of his debts - and thereby give him a real opportunity for financial rehabilitation and return to the productive cycle of life.

The revolution in the field came with the entry into force of the Insolvency and Financial Rehabilitation Law, 5778-2018, which changed the approach from focusing on punishing the debtor to focusing on his rehabilitation. Proper management of the process, with close accompaniment of an experienced insolvency lawyer, is the key to success. This guide will detail the existing tracks for debt elimination, the stages of the process, and the vital role of the lawyer in achieving the desired result: a new and clean financial page.

The revolution in the field: From bankruptcy law to insolvency and financial rehabilitation law

Until 2019, bankruptcy proceedings in Israel were conducted under the "Bankruptcy Ordinance," an outdated mandatory law that focused mainly on collecting the debtor's assets and selling them for the benefit of creditors. The process was perceived as humiliating, lasted for years, and left the debtor with a mark of shame.

The new Insolvency and Financial Rehabilitation Law fundamentally changed the conception. As its name suggests, the central emphasis moved from "bankruptcy" to "financial rehabilitation." The overarching goal of the law is to bring about the individual's financial rehabilitation, while examining his realistic capabilities and defining a time-limited track at the end of which he can receive a discharge.

The main changes include:

• Shortening the duration of proceedings: The law establishes a clear timeframe for the process, centered on a payment plan that usually lasts about three years (instead of proceedings that could drag on for 7-10 years or more in the past).
• Making the process accessible: The law created different tracks adapted to the amount of debt, with relatively low debts being handled within the framework of the execution office in a simpler and faster process.
• Emphasis on rehabilitation: The entire process is aimed at building a "financial rehabilitation plan" for the debtor, and the trustee appointed to the case is obliged to help formulate it.
• Protection of the debtor: The law provides broader protection for the debtor's residence and basic needs.

Understanding this new philosophy is crucial, and it emphasizes the importance of a debt elimination lawyer who is updated with the case law and the spirit of the new law.

Good faith: The cornerstone of insolvency proceedings

The right to receive discharge and financial rehabilitation is not automatic. It is reserved for those who acted in good faith. This is a fundamental principle that accompanies the process from beginning to end. The supervisor of insolvency proceedings, the trustee, and the court will carefully examine the debtor's conduct, both at the stage of creating the debts and during the process itself.

What is good faith in this context?

Good faith is a broad concept, but generally refers to honesty, integrity, and absence of fraudulent intent. In the context of creating debts, the court will examine whether the debts were created due to business entanglement, personal crisis (such as divorce or illness), or simply poor financial management - versus a situation where the debts were created out of fraudulent intent, gambling, or a wasteful and squandering lifestyle knowing that there is no way to return the money.

What will be considered bad faith?

Certain actions may indicate bad faith and significantly endanger the debtor's chances of receiving discharge. Examples include:

• Asset concealment: Transferring an apartment, vehicle, or money to family members or friends near the opening of the proceedings, with the intention of hiding them from creditors.
• Creating new debts knowingly: Taking large loans or making significant purchases in the period before opening the proceedings, knowing clearly that the debtor will not be able to meet the repayments.
• Preferential treatment of creditors: Paying off a large debt to a specific creditor (for example, a family member) while ignoring other creditors, near the opening of the proceedings.
• Providing false information: Concealing material information in the application, declaring income lower than reality, or not disclosing all assets.
• Non-cooperation: Ignoring trustee requirements, not submitting reports on time, or attempting to disrupt the proceedings.

Important to emphasize: Even if there were failures in conduct, this does not mean the door closes automatically. An experienced debt elimination lawyer will know how to present the circumstances correctly, explain the background that led to the entanglement, and emphasize the debtor's sincere desire to rehabilitate and open a new page.

The main tracks for debt elimination in Israel

Israeli law offers several tracks through which a private individual can achieve debt elimination. The choice of the right track depends on the amount of debts, their types, and the debtor's personal circumstances.

1. Insolvency and financial rehabilitation proceedings

This is the most central and comprehensive process, intended for individuals whose total debts exceed approximately NIS 166,000 (the amount is updated from time to time). The process is conducted with the supervisor of insolvency proceedings at the Ministry of Justice, and includes several clear stages:

Stage A: Submitting the application and issuing an "order to open proceedings"

The debtor, through his lawyer, submits a detailed application for an order to open proceedings. The application includes all details of debts, creditors, assets, income and expenses of the debtor. Upon submission, and subject to initial examination, the supervisor issues an "order to open proceedings".

This order has dramatic and immediate effects:

• Absolute stay of proceedings (freezing of proceedings): All collection proceedings in the execution office, seizures, and legal actions by creditors are stopped immediately. The debtor receives "industrial quiet" that allows him to begin the rehabilitation process.
• Cancellation of restrictions: Most restrictions imposed on the debtor within the execution office (such as restriction on driving license for economic reasons) are canceled.

Stage B: Interim period (examination period)

This period lasts about 9 months, during which:

• Appointment of a trustee: The supervisor appoints a trustee to the case (usually a lawyer or accountant), whose role is to examine the debtor's financial condition, the circumstances of the debt creation, and formulate recommendations for continuation.
• Debtor's obligations: The debtor is required to cooperate fully with the trustee, submit monthly reports on his income and expenses, and pay a monthly payment to the creditors' fund, as determined by the supervisor.

Stage C: Formulating a "financial rehabilitation plan" and issuing the order

At the end of the interim period, the trustee submits his recommendations to the supervisor and the court in a detailed report. Based on the report, the court issues a "financial rehabilitation order". This order is essentially a detailed work plan for the debtor's recovery, and includes:

• Payment period: Determining a monthly amount that the debtor will pay to the creditors' fund, and for what period (usually 36 months).
• Asset realization (if necessary): Determining whether there are "realizable" assets (such as stocks, land, or part of a residence above a certain value) that should be sold for the benefit of creditors.
• Financial management training: Sometimes, the plan will require the debtor to participate in a workshop on proper financial management.

Stage D: Receiving the coveted discharge (debt elimination)

After the debtor has met all the conditions of the financial rehabilitation plan and paid the payments in order, he will receive from the court the discharge. The discharge cancels all remaining claimable debts that were created before the order to open proceedings was issued, and allows the debtor to open a new page clean of debts.

2. Debt elimination in the execution office

This track is intended for debtors whose total debts are lower than the threshold set in the law (approximately NIS 166,000). The entire process is conducted with the registrar of the execution office and is considered faster and simpler. Here too, the debtor is required to pay monthly payments for a period (usually three years), and at its end, if he met the conditions, will receive discharge from his debts. This track is particularly suitable for debtors with relatively low-scale debts, who want an efficient and focused process.

3. Creditors' arrangement

It's not always necessary to enter a full legal process. A skilled debt elimination lawyer can work to achieve a "creditors' arrangement" for his client. In this framework, the lawyer proactively approaches all creditors and negotiates with them with the aim of reaching an agreement on reduced payment of the debt, in convenient installments or a one-time payment. Many creditors will prefer to receive a lower amount with certainty and immediately, rather than be dragged into a long insolvency process at the end of which they may receive a meager amount or nothing at all. A successful creditors' arrangement can save time, money, and avoid the restrictions associated with insolvency proceedings.

Trustee investigation and debtor conduct: What to expect in the interim period?

The interim period, from the moment the order to open proceedings is issued until the rehabilitation plan is determined, is a critical stage. During this period, the trustee appointed to the case conducts a comprehensive investigation in order to get a complete picture of the debtor's condition. There is nothing to fear from the investigation if acting with transparency and good faith, but it is important to be prepared for it.

What does the trustee examine?

• Income sources and assets: The trustee will verify the debtor's declarations regarding his income from all sources, and will conduct checks in official registries (Land Registry, Licensing Office, Company Registrar) to locate assets registered in the debtor's name.
• Bank and credit card statements: The trustee will examine the activity in the debtor's bank accounts, usually for a period of several years back. He will look for unusual transactions, large cash withdrawals, or money transfers that require explanation.
• Circumstances of debt creation: The trustee will try to understand how the debts were created. Are these bank loans? Debts to suppliers due to a collapsed business? Debts to the gray market? This understanding helps him formulate a recommendation regarding the debtor's good faith.
• Examination of debt claims: The trustee examines every debt claim submitted by creditors, ensures it is backed by documents, and approves or rejects it.

Debtor investigation

In many cases, the trustee will summon the debtor for formal investigation at his office. The investigation is recorded in a protocol, and the debtor is required to answer questions under warning. The debtor's lawyer may and should be present at the investigation to protect his rights. The questions will focus on the debtor's financial conduct, his assets, and his obligations. Full cooperation and providing reliable information at this stage are critical for the continuation of the process.

The role of a debt elimination lawyer: More than a representative, a partner on the journey

Dealing with debt elimination proceedings alone is almost impossible. This is a complex bureaucratic process, requiring deep legal knowledge, familiarity with the system, and proper strategic management. The role of the lawyer is critical at every stage:

• Diagnosis and initial consultation: In the first stage, the lawyer will analyze your financial situation, map the debts and assets, and recommend the correct and most suitable course of action for you.
• Preparation and submission of the application: Preparing a professional, detailed and accurate application is a necessary condition for obtaining the order to open proceedings. Errors or omissions at this stage may delay the process or even lead to rejection of the application.
• Representation before authorities: The lawyer represents you in all contact with the supervisor, trustee, execution office registrar and court. He responds to their questions, manages negotiations on your behalf, and ensures your rights are preserved.
• Protection of your assets: Experienced debt elimination lawyers will know how to act to protect your essential assets as much as possible, and especially the residence, within the framework of the law.
• Managing negotiations on the rehabilitation plan: The lawyer will manage negotiations with the trustee with the aim of reaching a fair and realistic rehabilitation plan, with a payment order you can meet, without harming your standard of living in an inhumane way.
• Peace of mind and personal accompaniment: Beyond the legal aspect, the lawyer provides you with professional "backing," an address for every question, and allows you the peace of mind to focus on rehabilitating your life, knowing that matters are being handled by a professional.

Life after discharge: How to rebuild the financial future?

Receiving discharge is a defining moment of enormous relief, but it is not the end of the story, but the beginning of a new chapter. "The day after" requires responsibility and proper conduct to ensure the crisis does not repeat itself.

Practical steps after receiving discharge:

1. "Cleaning" the records: The discharge does not automatically update all systems. It is important to ensure, with the help of the lawyer, that notice of the discharge is sent to the execution office to close all files, to the Bank of Israel, and to various banks to update the records.
2. Credit history rehabilitation: Insolvency proceedings leave a negative record in the credit data report (BDI) for several years. It will be difficult, and even impossible, to get regular loans or credit cards in the first period.
   • Start small: Use a debit card (immediate charge) to manage expenses in a controlled manner.
   • Building trust: After a period, you can try to get a credit card with a very low limit, or a prepaid card. Strict adherence to payments will begin to rebuild your credit rating.
   • Patience: Credit history rehabilitation is a gradual process that takes time. The most important thing is to avoid creating new debts and pay every bill on time.
3. Adopting new financial habits: Discharge is an opportunity to learn from past mistakes. This is the time to build an orderly family budget, track income and expenses, save (even small amounts), and avoid impulsive purchases. Financial management training, which is sometimes part of the rehabilitation plan, provides important tools that should be implemented over time. True financial freedom is not just the absence of debts, but the ability to manage financial life in a stable, responsible and calm manner.

Summary: The path to financial freedom begins with one step

Life under the yoke of debts is a life of constant pressure and worry. The Insolvency and Financial Rehabilitation Law is designed precisely to give hope and a real solution to honest people who got into crisis. The process allows stopping the race of seizures and harassment, creating certainty and at the end of a structured process - receiving discharge and starting a new path. The key to success lies in making a courageous decision to act and choosing a professional, experienced and humane debt elimination lawyer, who will accompany you hand in hand all the way to financial freedom.