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Bankruptcy Ordinance [New Version], 5740-1980

פקודת פשיטת הרגל [נוסח חדש], תש"ם-1980

Published: 1980-09-09Consolidated Hebrew text as of 2019-01-01 · Last amended 2018-03-15✓ Amendment status checked against the Knesset legislation record on 2026-09-04
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Unofficial English translation — for reference only. It may contain errors or omissions and cannot be relied on as a legal text. Only the Hebrew text published in Reshumot is legally binding.More

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Despite these checks, it may contain errors, omissions, or imprecise renderings of legal terminology and cross-references, and it may not yet reflect the latest amendments. It cannot be relied upon as a legal text.

The Hebrew text as published in Reshumot (ספר החוקים) and on the Knesset website is the sole authoritative and legally binding version. In any discrepancy, the Hebrew text prevails.

This translation is provided for informational purposes only and does not constitute legal advice. For use in legal proceedings, request a certified Expert Legal Opinion.

Section F: Distribution of Property

Declaration and Distribution of Dividends§
130.
(a)The trustee shall, with reasonable expedition, declare dividends and distribute them among the creditors whose claims have been admitted, provided that he shall retain in his hands such sums as may be necessary to cover administration expenses and other expenses.
(b)Before declaring a first dividend the trustee shall publish in Reshumot (Official Gazette), in the prescribed manner, notice of his intention to do so, and shall also send reasonable prior notice thereof to every creditor mentioned in the bankrupt's statement who has not proved his debt.
(c)to (e) (Repealed).
Joint and Separate Dividends§
131.

Where joint and separate property are both being administered —

(1)dividends of the joint and separate property shall be declared together, unless the Official Receiver otherwise directs on the application of a person having an interest;
(2)the trustee shall apportion the expenses connected with dividends fairly between the joint and the separate property, having regard to the work done for and the benefit accruing to each property.
Restrictions on Distribution of Dividend§
132.

All moneys in the hands of the trustee shall be distributed as dividend, but in calculating and distributing it the trustee shall take into account —

(1)provable debts which, according to the bankrupt's statements or other evidence, are owing to persons whose places of residence are so distant from the place where the trustee operates that in the ordinary course of communication they have not had sufficient time to submit their claims, or to substantiate them if disputed;
(2)provable debts in bankruptcy that are the subject of proceedings not yet determined;
(3)provable debts and proceedings in respect of which there is a dispute;
(4)expenses necessary for the administration of the property and other expenses.
Right of Creditor Whose Debt Was Not Admitted§
133.

A creditor whose debt was not admitted until after one or more dividends have been declared shall be entitled to be paid, out of any money then in the hands of the trustee, any dividends not received, before that money is applied to the payment of any future dividend, but the distribution of a dividend declared before the admission of the debt shall not be disturbed by reason only of that creditor not having participated therein.

Interest on Debts [63] [1942]§
134.
(a)Where a debt admitted in bankruptcy includes interest or any pecuniary consideration in lieu of interest, the interest or consideration shall be calculated, for the purpose of dividend, at a rate not exceeding the rate fixed for the purposes of section 4 of the Adjudication of Interest and Linkage Law, 5721-1961.
(b)The following rules shall apply to the proof of a debt:
(1)any account between the debtor and the creditor settled within the three years before the date on which the receiving order was made may be examined, and if it appears that the settlement of the account and the debt alleged to be due out of the debtor's property constitute substantially one transaction, whether by way of renewal of a loan, capitalisation of interest, consolidation of loans, or otherwise, the account may be reopened and the whole transaction dealt with as one;
(2)payments made by the debtor to the creditor before the receiving order, whether by way of bonus or otherwise, and any amount received by the creditor before the receiving order from the realisation of security for the debt, shall, notwithstanding any agreement to the contrary, be appropriated to payments of principal and interest in the proportion that the principal bears to the amount payable as interest at the agreed rate;
(3)where the debt is secured, and the security is realised after the receiving order or its value has been estimated and included in the proof, the amount realised or estimated shall be appropriated to payments of principal and interest in the proportion that the principal bears to the amount payable as interest at the agreed rate.
Final Dividend§
135.
(a)Where the trustee has realised all the property of a bankrupt, or all the property that in the opinion of the trustee and the committee of inspection can be realised without needlessly protracting the trusteeship, the trustee shall declare a final dividend.
(b)Before declaring a final dividend, the trustee shall give notice, in the prescribed manner, to all persons claiming to be creditors of the debtor but who have not established their claims to the trustee's satisfaction, that if they do not do so to the satisfaction of the court within the time specified in the notice, the trustee will proceed to declare a final dividend without regard to their claims.
(c)Upon the expiration of the time specified in the notice — or any further time allowed by the court to a claimant on application — the property of the bankrupt shall be distributed among the creditors whose claims have been admitted, without regard to the claims of any other persons.
Bar to Action§
136.

Where the trustee refuses to pay a dividend, the court may order him to pay it, and also to pay out of his own pocket interest thereon for the time it has been withheld and the costs of the application; but no action shall lie against the trustee in respect of a dividend otherwise than under this Ordinance.

Right of Bankrupt to Surplus [66] (5739)§
137.

After all that is owing to creditors has been paid, together with interest or linkage differentials or linkage differentials and interest up to the date of payment, and all the costs of the proceedings in respect of the bankruptcy petition, the surplus shall be paid to the bankrupt.

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Chapter IV: Official Receivers

Appointment of Official Receivers and Deputies [67, 68]§

138.
(a)The Minister shall appoint, by Order in Reshumot (Official Gazette), such Official Receivers as appear to him fit for the property of debtors, who shall act in accordance with the Minister's general directions and instructions, but shall nevertheless be officers of the courts to which they are attached.
(b)The Minister shall determine the number of Official Receivers and the districts assigned to them.
(c)The Minister may by Order direct that a State employee specified in the Order shall perform the functions of the Official Receiver during any temporary vacancy in the office or when an Official Receiver is temporarily absent by reason of illness or other cause.
(d)The Minister may appoint a deputy and an assistant or assistants to an Official Receiver and determine their powers.

Status of Official Receiver§

139.
(a)The functions of an Official Receiver shall relate both to the conduct of the debtor and to the administration of the debtor's property.
(b)An Official Receiver may administer oaths on affidavits verifying proofs of debt, applications and other proceedings under this Ordinance.
(c)Any provision of this Ordinance referring to a trustee in bankruptcy shall be construed as referring also to an Official Receiver acting as trustee, unless this Ordinance otherwise provides or the context otherwise requires.
(d)The trustee shall furnish the Official Receiver with information, allow him access to the books and documents of the bankrupt, facilitate his examination thereof, and assist him to the extent necessary for the performance of his functions under this Ordinance.
(e)The Official Receiver shall be a party to every proceeding conducted before the court under this Ordinance.

Functions of Official Receiver as Regards Conduct of Debtor§

140.

In relation to the debtor, it shall be the duty of the Official Receiver —

(1)to investigate the conduct of the debtor and to report to the court, stating whether there is reason to believe that the debtor has committed an act that is an offence under this Ordinance or that constitutes a ground for the court to refuse a discharge order, or to suspend a discharge order or to attach conditions thereto;
(2)to make such other reports regarding the conduct of the debtor as the court may direct;
(3)to take part in the public examination of the debtor;
(4)to participate in and assist in any criminal prosecution against a debtor for a fraudulent act, as directed by the Attorney General.

Functions of Official Receiver as Regards Property of Debtor [71(1)]§

141.

In relation to the property of the debtor, it shall be the duty of the Official Receiver —

(1)to act as interim receiver of the debtor's property until a trustee is appointed, and as manager of the property if no special manager has been appointed for that purpose;
(2)to authorise the special manager to raise money or pay money for the purposes of the property in any case in which it appears necessary to do so for the benefit of the creditors;
(3)to summon and preside at the first meeting of creditors;
(4)to issue proxy forms for use at meetings of creditors;
(5)to place before the creditors any proposal made by the debtor regarding the manner of winding up his affairs;
(6)to publish any matter required to be published under this Ordinance;
(7)to act as trustee whenever the office of trustee becomes vacant.

Official Receiver as Interim Receiver or Manager [71(2)]§

142.

In the performance of his functions as interim receiver or manager —

(1)the Official Receiver shall, so far as practicable, ascertain the wishes of the creditors regarding the administration of the debtor's property, and for that purpose may summon meetings of persons claiming to be creditors;
(2)the Official Receiver shall not incur expenses beyond what is necessary for the preservation of the debtor's property or for dealing with perishable property, unless the court otherwise directs, but if the debtor is unable to prepare an adequate statement of the debtor's affairs himself, the Official Receiver may employ persons to assist in the preparation of the statement at the expense of the property and subject to the prescribed conditions.

Representative§

142a.
(a)The Official Receiver may perform any of his functions also through a person who is not among the State employees (hereinafter — representative) and pay the representative's remuneration.
(b)A representative shall act in accordance with the directions of the Official Receiver and under his supervision, but nothing therein, nor the payment of the representative's remuneration under subsection (a), shall create an employer-employee relationship between the representative and the Official Receiver or the State.
(c)The Official Receiver may, before or after the appointment of a representative, require the representative to charge property or give security to ensure the performance of the representative's functions and duties, and may at any time require an additional security from the representative or release a security given, in whole or in part.

Reporting [71(3)]§

143.

Every Official Receiver shall submit a report to such person as the Minister directs, and shall pay over all moneys and deal with all security as the Minister directs.

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Chapter V: Trustees in Bankruptcy

Section A: Office of the Trustee

Official Name§
144.

The official name of a trustee in bankruptcy shall be "the trustee of the property of [name], a bankrupt (stating the name)", and by that name the trustee may, in Israel or elsewhere, hold property of any kind, enter into contracts, sue and be sued, incur obligations binding upon the trustee and the trustee's successors in office, and do any act necessary or expedient in the performance of the trustee's functions.

145.§

(Repealed — תיקון מס' 1, 1983)

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Section B: Supervision of the Trustee

146.§

(Repealed — תיקון מס' 1, 1983)

Convening General Meetings [74(2)]§
147.
(a)The trustee may convene general meetings of creditors for the purpose of ascertaining their wishes, and shall convene meetings at such times as the creditors may by resolution direct.
(b)Any creditor may, with the concurrence of creditors holding one-sixth in value of the claims, including the creditor himself, at any time request the trustee or the Official Receiver to convene a meeting of creditors, and the trustee or the Official Receiver shall accordingly convene such a meeting within fourteen days, provided that the person initiating the meeting shall deposit with the convener a sum sufficient to pay the expenses of convening the meeting; the sum shall be returned to that person out of the property if the creditors or the court so direct.
Application for Directions [74(3)]§
148.

The trustee may apply to the court, in the prescribed manner, for directions in relation to any matter arising in connection with the bankruptcy.

Annual Report of Trustee§
148a.
(a)At least once a year the trustee shall report to the court on the progress of the administration of the bankruptcy.
(b)The court shall hold a hearing on the trustee's report and shall summon thereto the debtor and the Official Receiver.
Discretion [74(4)]§
149.

In administering the property and distributing it among the creditors, the trustee shall exercise the trustee's discretion subject to the provisions of this Ordinance.

Application to the Court§
150.

Where a bankrupt, a creditor or any other person is aggrieved by an act or decision of the trustee, that person may apply to the court, and the court may confirm, annul or vary the act or decision and make such order in the matter as it thinks just.

Supervision by the Official Receiver§
151.
(a)The Official Receiver shall keep attention to the conduct of trustees; where a trustee has not faithfully discharged his duties or has not duly fulfilled all that is imposed upon him under this Ordinance or under the Regulations or otherwise, or where a creditor has lodged a complaint with the Official Receiver in that regard, the Official Receiver shall investigate the matter and take such action as he deems expedient.
(b)The Official Receiver may require a trustee to answer any question in relation to any bankruptcy in which the trustee is engaged, and may apply to the Court to examine, on oath, the trustee or any other person in connection with a bankruptcy.
(c)The Official Receiver may direct that the trustee's books and vouchers be inspected at the place where they are kept.

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Section C: Remuneration and Expenses

Remuneration and Expenses of the Trustee§
152.
(a)Where a person other than the Official Receiver is appointed as trustee, he shall receive remuneration and expenses as the Court shall direct in accordance with rules prescribed by the Minister; where several trustees are appointed, the remuneration shall be divided among them in such proportion as the Court shall determine.
(b)The Minister, in consultation with the Minister of Finance, may prescribe that part of the remuneration of a trustee shall be paid from the State Treasury.
(c)The Minister, with the approval of the Constitution, Law and Justice Committee of the Knesset, may prescribe rules concerning the remuneration and expenses of a trustee that are to be paid under subsection (a).
153.§

(Repealed — תיקון מס' 1, 1983)

Prohibition of Arrangements Regarding Remuneration§
154.

A trustee shall not receive from the bankrupt, or from a solicitor, auctioneer, or any other person employed in the bankruptcy, any gift, remuneration, consideration, or pecuniary or other benefit, other than the remuneration referred to in section 152(a).

Restriction on Payment to Another Person [78(1)]§
155.

A trustee or manager who receives remuneration for his services shall not be allowed in his account of expenses any payment to another person for the performance of the ordinary duties which under this Ordinance or the Regulations he is required to perform himself.

Trustee Who is a Solicitor [78(2)]§
156.

A trustee who is a solicitor may stipulate that his remuneration for services as trustee shall include all his professional services.

Taxation of Expenses [78(3), (4)]§
157.
(a)Every bill of costs and claim for payment of solicitors, managers, accountants, auctioneers, brokers and other persons, not being trustees, shall be subject to taxation by the officer designated for that purpose (in this section — the officer), and no payment shall be allowed under such bills in the accounts of the trustee unless the taxation has been proved.
(b)Before declaring a dividend, the trustee shall, in due time, request every person referred to in subsection (a) to deliver his list of expenses and claims to the officer for taxation; a person who does not deliver the list within seven days of receiving the request, or within such further time as the Court has permitted upon application, shall have the trustee declare and distribute the dividend without regard to any claim of his, and the claim shall be void both as against the estate and as against the trustee personally.
(c)The officer shall not certify bills of costs and claims before being satisfied that the employment of those submitting them, in the matters out of which the payments arise, was duly authorised as prescribed before their employment, except in urgent cases where it must be shown that there was no unreasonable delay in obtaining authorisation.
(d)Subject to appeal before the Court, the officer may in his discretion reduce or disallow any payment or claim which in his opinion is excessive or which was incurred improperly or unnecessarily.

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