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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.

Chapter VII: Special Cases

Section A: Partners, Limited Partnerships and Small Bankruptcies

Liability of Partners§
199.

Every partner shall be liable for the debts and obligations of the partnership in accordance with partnership law.

Application to Limited Partnerships§
200.

The provisions of this Ordinance shall apply, subject to modifications in the Regulations made thereunder, to a limited partnership as if it were an ordinary partnership; if all its general partners have been adjudicated bankrupt, its property shall be conveyed to the trustee.

Application to Small Bankruptcies§
201.
(a)Where a bankruptcy petition has been presented by or against a debtor, and the court is satisfied on the basis of an affidavit or otherwise, or where the Official Receiver has notified the court, that the value of the debtor's property is not likely to exceed the prescribed amount, the court may order that the debtor's property be administered in a summary manner, and accordingly the provisions of this Ordinance shall apply with the following modifications:
(1)upon the debtor being adjudicated bankrupt, the Official Receiver shall be the trustee;
(2)there shall be no committee of inspection, but the Official Receiver may, with the leave of the court, do anything that a trustee would have been entitled to do with the leave of the committee of inspection had one existed;
(3)in order to save costs and simplify proceedings, modifications to the provisions of this Ordinance may be prescribed by Regulations, other than provisions relating to the examination of the debtor and his discharge.
(b)Notwithstanding subsection (a), the creditors may at any time resolve, by special resolution, that a person other than the Official Receiver be appointed trustee, and upon so doing the bankruptcy shall be administered as if no order for summary administration had been made.
(c)Where the court is of the opinion that the value of the debtor's property is not likely to exceed ten thousand shekels or such other prescribed amount, the following provisions shall also apply:
(1)an order of the court shall not be subject to appeal except with its leave;
(2)the property shall be distributed, if practicable, in one dividend.

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Section B: Property of Deceased Debtors

Order for Administration of Estate in Bankruptcy [112(1)–(3)]§
202.
(a)Where a debtor has died and a creditor holds against the debtor a debt upon which a bankruptcy petition could have been grounded against the debtor had he been alive, the creditor may present to the court an application that an order be made under which the estate of the debtor shall be administered according to the law of bankruptcy (hereinafter in this Section — an administration order).
(b)Where notice of the application has been given to the legal representative of the debtor, and the existence of the debt has been proved to the court, and the court sees no reasonable possibility that the estate will be sufficient to discharge the deceased's debts, it may make an administration order; where cause is shown before it against making the order, it may dismiss the application and may order the applicant to pay the respondent's costs.
(c)Where an application under this section is presented after proceedings have been commenced in a court or in a religious tribunal concerning the administration of the debtor's estate, the court may, if it is of the opinion that the estate is insufficient to pay the debts, order that the matter be transferred to it, and the transfer order shall have the same effect as an administration order.
203.§

(Repealed — תיקון מס' 1, 1983)

Powers of the Official Receiver and Creditors [112(5)]§
204.

Upon the making of an administration order, the property of the debtor shall be vested in the Official Receiver attached to the court, in the capacity of trustee thereof, and he shall forthwith proceed to realise and distribute it in accordance with the provisions of this Ordinance; however, the creditors shall have rights with respect to the appointment of trustees and committees of inspection such as they have in other cases where the property of a debtor is being administered in bankruptcy, and the provisions of this Ordinance relating to trustees and committees of inspection shall apply to trustees and committees of inspection appointed by virtue of this section.

Effect of Administration Order as Adjudication of Bankruptcy [112(6)] Amendment 5741-1981§
205.

All the provisions of this Ordinance relating to the administration of the property of a bankrupt shall apply, subject to sections 206 to 208 and in so far as they are capable of application, to an administration order, in the same way as they apply to an adjudication of bankruptcy under this Ordinance.

Priority [112(7)]§
206.

The reasonable expenses of the funeral of the deceased debtor, and the costs of the estate and its administration, shall be given priority and shall be paid in full out of the debtor's estate before any other debt.

Surplus of the Estate [112(8)]§
207.

Where a surplus remains in the hands of the Official Receiver or the trustee after all debts due from the debtor have been paid in full, together with the costs of administration, interest and linkage differentials as prescribed in this Ordinance for the case of bankruptcy, the surplus shall be paid to the heirs of the deceased debtor or to the estate administrator, or shall be dealt with as the court directs.

Effect of Notice of Application for Administration Order [112(9)]§
208.

Notice to the heirs of a debtor or to the estate administrator of the presentation of an application by a creditor under this Section shall be deemed — if an administration order is made pursuant thereto — to be equivalent to notice of an act of bankruptcy, and after such notice no payment or transfer of property by the heirs or the estate administrator shall operate to discharge them as against the Official Receiver or the trustee; however, nothing in the provisions of this Section shall affect the validity of any payment or act done by the heirs or the estate administrator in good faith before the date of the administration order.

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Section C: Unclaimed Funds

Bankruptcy Estates Account [126(1)]§
209.

At a bank designated by the Minister of Finance there shall be an account to be called the Bankruptcy Estates Account.

Unclaimed Funds [126(1)]§
210.

The following are funds which the trustee shall forthwith pay into the Bankruptcy Estates Account and shall be entitled to a receipt therefor, which shall serve as his discharge in respect thereof:

(1)a dividend under a composition or arrangement under this Ordinance that is in his control and has not been claimed within six months;
(2)funds received from the debtor's property that remain in his hands or under his control after payment of the final dividend and have not been claimed or distributed.
Late Claim for Payment [126(3), (4)]§
211.
(a)A person claiming to be entitled to money paid to the bank under this Section may apply to the Official Receiver for the money to be paid to him, and the Official Receiver shall so direct if he is satisfied that the applicant is entitled to the money.
(b)A person who considers himself aggrieved by a decision of the Official Receiver in respect of a claim under this section may appeal to the court.

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Chapter VIII: Bankruptcy Offences

Person Holding Himself Out as a Creditor [14(4) proviso]§

212.

A person who falsely declares in writing that he is a creditor of a named bankrupt, for the purposes of section 25(d), is liable — to one month's imprisonment.

Non-Compliance with Composition or Arrangement [16(15) proviso]§

213.

A person who fails to comply with an order made upon an application as referred to in section 36 shall be guilty of an offence.

Failure to Provide Information§

213a.
(a)A person who is required to provide information to the Official Receiver under the provisions of this Ordinance and who knowingly provides partial or false information is liable — to one year's imprisonment; the provisions of this section shall not apply to a tax authority as defined in section 60a.

Debtor Who Refused to Assist in Discovery of Property [22(4)]§

214.

A debtor who wilfully failed to perform his duty under section 56, or to deliver any part of property in his possession or control that is divisible among his creditors to the Official Receiver or to the trustee or to any person authorised by the Court to hold such property, is liable to imprisonment of three years.

Breach of Restrictions§

214a.
(a)A debtor who breached a restriction imposed upon him under sections 42a(a) or (b) is liable to imprisonment of one year.
(b)A debtor who breached a restriction imposed upon him under section 42a(c) is liable to imprisonment of three years.

Trustee Who Refused to Pay Interest and Expenses [84(4) Proviso]§

215.

A trustee who was ordered to pay to the account of the property of a bankrupt interest or expenses as referred to in section 164 and refused to do so shall be guilty of an offence.

Fraudulent Acts and Omissions§

216.

A person who committed any of the acts or omissions mentioned below, after having been adjudicated bankrupt or after a receiving order was made against his property, is liable to imprisonment of four years:

(1)failed to disclose to the trustee or to the Official Receiver (hereinafter in this section — the trustee), truly and fairly to the best of his knowledge and belief, all his property, movable property and real property, and how, to whom, for what consideration and when he dealt with every part thereof, other than what he dealt with in the ordinary course of his business and what he paid on account of ordinary household expenses;
(2)failed to deliver to the trustee, or to deliver as directed by the trustee, every part of his property, movable property and real property, which is in his custody or control and which the law requires him to deliver;
(3)failed to deliver to the trustee, or to deliver as directed by the trustee, all books, documents, papers and writings in his custody or control relating to his property or affairs;
(4)after a bankruptcy petition was presented by or against him, or within twelve months before it was presented, concealed any part of his property, or any debt due to or from him;
(5)after a bankruptcy petition was presented by or against him, or within twelve months before it was presented, fraudulently removed any part of his property;
(6)omitted a material particular from any statement concerning his affairs;
(7)knowing or believing that a person had falsely proved a debt in the bankruptcy, failed to inform the trustee thereof within one month;
(8)after a bankruptcy petition was presented by or against him, prevented the production of any book, document, paper or writing belonging or relating to his property or affairs;
(9)after a bankruptcy petition was presented by or against him, or within twelve months — and in relation to account books referred to in section 221, within two years — before it was presented, concealed, destroyed or mutilated any book or document belonging or relating to his property or affairs, or falsely altered an entry therein or made a false entry therein, or had knowledge of such concealment, destruction, mutilation, alteration or entry;
(10)after a bankruptcy petition was presented by or against him, or within twelve months — and in relation to an account book referred to in section 221, within two years — before it was presented, fraudulently parted with, altered or made any omission in, any document belonging or relating to his property or affairs, or had knowledge that such parting with, alteration or omission in the document was done fraudulently;
(11)after a bankruptcy petition was presented by or against him, or at a meeting of creditors within twelve months before it was presented, attempted to account for any deficiency in his property by fictitious losses or expenses;
(12)within twelve months before a bankruptcy petition was presented by or against him, or after it was presented and before the receiving order was made, obtained property on credit by means of false pretence or other fraud, and did not pay for it;
(13)within twelve months before a bankruptcy petition was presented by or against him, or after it was presented and before a receiving order was made, obtained property on credit by means of the false pretence that he was carrying on business, or, if he is a trader, that he was acting in the ordinary course of his trade, and did not pay for it;
(14)within twelve months before a bankruptcy petition was presented by or against him, or after it was presented and before a receiving order was made, charged or transferred property for which he had not paid, unless he is a trader and the charge or transfer was in the ordinary course of his trade;
(15)used false pretence or other fraud to induce his creditors or any of them to reach an agreement in relation to his affairs or to the bankruptcy.

Defence§

217.

It shall be a defence for an accused of an offence under section 216 if he proves —

(1)in relation to paragraphs (1) to (4), (6), (13) and (14) — that he had no intent to defraud;
(2)in relation to paragraphs (8) and (9) — that he had no intent to conceal the state of his affairs or to contravene the law.

Obtaining Credit Before Discharge§

218.

A bankrupt who has not been discharged and who did any of the following is liable to imprisonment of one year:

(1)alone or jointly with another, obtained credit without informing the grantor thereof that he is an undischarged bankrupt;
(2)engaged in any business or trade under a name other than that under which he was adjudicated bankrupt, without disclosing to every person with whom he conducted a commercial transaction the name under which he was adjudicated bankrupt.

Fraud After Receiving Order§

219.

A person who has been adjudicated bankrupt or against whose property a receiving order has been made, and who did any of the following, is liable to imprisonment of three years:

(1)incurred a debt or obligation by way of credit obtained by false pretence or other fraud;
(2)in order to defraud his creditors or any of them, made a gift of any part of his property, or transferred or charged it, or caused such gift, transfer or charge to be made; for this purpose, the taking of execution proceedings against such property, or silent acquiescence in their being taken, shall be deemed a transfer or charge of the property;
(3)in order to defraud his creditors, concealed or made away with any part of his property after failing to satisfy a judgment or order for the payment of money given against him, or did so within two months before such judgment or order was given.

Gambling and Hazardous Speculation§

220.
(a)A person who has been adjudicated bankrupt or against whose property a receiving order has been made, and who on the date of the order had outstanding against him debts incurred in the course of his business or trade, and who knowingly did any of the following, shall be guilty of an offence:
(1)within two years before the bankruptcy petition was presented, materially increased, or caused to be materially increased, his insolvency by gambling or by rash and hazardous speculation having no connection with his business or trade;
(2)between the date of presentation of the petition and the date of the receiving order, lost any part of his property by gambling or by rash or hazardous speculation as aforesaid;
(3)when required to do so by the Official Receiver or the trustee at any time, or by the Court in the course of his public examination, to explain any material loss of property incurred within the year immediately before the date of presentation of the bankruptcy petition, or between that date and the date of the receiving order, fails to give a satisfactory explanation of how the loss was incurred.
(b)In determining whether the speculations were rash and hazardous, the financial position of the accused at the time he made them shall be taken into account.
(c)(Repealed).

Failure to Keep Proper Account Books [131(1)-(3)]§

221.
(a)A bankrupt or a person against whose property a receiving order has been made, who was engaged in any business or trade at any time within the two years immediately before a bankruptcy petition was presented against him, and who did not keep proper account books throughout that time and during the time he was so engaged between the date on which the petition was presented and the date on which the receiving order was made, or who did not preserve all the account books he kept as aforesaid, shall be guilty of an offence.
(b)A person shall not be convicted of an offence under subsection (a) if any of the following conditions is fulfilled:
(1)his unsecured liabilities on the date on which the receiving order was made did not exceed five thousand shekels or such other sum as may be prescribed;
(2)he had never previously been adjudicated bankrupt and had never reached a compromise or arrangement with his creditors, and his liabilities as aforesaid did not exceed fifty shekels;
(3)he proved that in the circumstances of his business or trade the default was in good faith and susceptible of a reasonable explanation.
(c)(Repealed).
(d)For the purposes of this section, a person shall be deemed not to have kept proper account books if he did not keep such books as are necessary to show or explain his transactions and his financial position in his business or trade, including books containing day-to-day entries in sufficient detail of all cash received and cash paid, and where the business or trade involved transactions in movable property — summaries of annual stock-takings, and in respect of movable property sold otherwise than by retail to a consumer — also a record of all movable property sold and purchased with sufficient details of the buyers and sellers to identify the movable property, the buyers and the sellers.

Absconding with Property§

222.

A person who has been adjudicated bankrupt or against whose property a receiving order has been made, and who, after a bankruptcy petition was presented by or against him or within six months before such presentation, left Israel taking with him, or attempted or made preparations to leave Israel taking with him, any part of his property which ought by law to have been divided among his creditors, is liable to imprisonment of three years, unless he proved that he had no intent to defraud.

False Claim§

223.

A creditor, or a person claiming to be a creditor, who wilfully and with intent to defraud filed in bankruptcy proceedings a false proof of debt, or a claim, declaration or account containing a false statement in a material particular, is liable to imprisonment of one year.

Court Order to Prosecute§

224.

Where an Official Receiver or a trustee in bankruptcy has reported to the Court that in his opinion the debtor who has been adjudicated bankrupt or against whose property a receiving order has been made has committed an offence under this Ordinance, or where the Court is satisfied, on the basis of a statement by a creditor or a member of the committee of inspection, that there is reason to believe that the debtor has committed such an offence and that there is a reasonable prospect of conviction and that in the circumstances it is desirable that the debtor be prosecuted, the Court shall order that the debtor be prosecuted for the offence.

The Prosecutor in Proceedings Pursuant to a Court Order§

225.

Where the Court has ordered, on the application of the Official Receiver and on the basis of his report, that a person be prosecuted for an offence under this Ordinance or for an offence arising from or connected with bankruptcy proceedings, the Official Receiver himself may, with the written authorisation of the Attorney General, file the charge and conduct the proceedings.

Preservation of Criminal Liability§

226.

A debtor who has committed an offence shall not be exempt from prosecution by reason of a discharge, compromise or arrangement.

The Competent Court [136(1)]§

227.

A person charged with an offence under this Ordinance shall be tried before a District Court.

Limitation [136(2)]§

228.

No proceedings shall be taken for an offence under this Ordinance after three years from the date on which it was committed.

Offence for Which No Penalty Is Specified§

229.

A person who commits an offence under this Ordinance for which no penalty is prescribed is liable to imprisonment of six months.

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