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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

This English text was translated from the official Hebrew using a range of translation tools, and it undergoes ongoing checks and updates. It is not a certified translation.

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 B: Report, Examination and Meeting

Statement of Affairs after Making of Receiving Order§
25.
(a)A debtor against whom a receiving order has been made shall prepare and submit to the Official Receiver a statement of affairs of his business, in which he shall specify his property, debts and liabilities, the names of his creditors, their addresses and occupations, the securities held by his creditors, the dates on which such securities were given, and any other particulars prescribed or required by the receiver.
(b)A statement under this section shall be in the prescribed form, verified by affidavit, and submitted within three days of the date of the making of the order if it was made on the application of the debtor, and within seven days of the date of the making of the order if it was made on the application of a creditor; the Court may, for special reasons, extend the time for its submission.
(c)A debtor who has not complied with the requirements of this section and had no reasonable excuse therefor may be declared bankrupt by the Court on the application of the Official Receiver.
(d)A creditor of a bankrupt may at any reasonable time inspect the statement, in person or by agent, and copy all or part of it.
(e)The Official Receiver may exempt the debtor from submitting a statement under this section if he considers that the statement submitted by the debtor under section 17(a)(2) contains the information necessary for the proper administration of the bankruptcy.
First Meeting of Creditors§
26.
(a)Upon the making of a receiving order, the Official Receiver shall convene a general meeting of creditors in order that they may consider whether a proposal for composition or arrangement should be accepted, or whether it is appropriate to declare the debtor bankrupt or to grant him a discharge and what should be the manner of dealing with the debtor's property in general; however, the Official Receiver may decide not to hold a meeting as aforesaid if he is of the opinion that, in the circumstances of the matter, there is no benefit to the bankruptcy proceedings in doing so.
(b)A creditor shall not be entitled to participate and vote at a meeting as aforesaid unless he has filed a proof of debt at the time and on the conditions prescribed under section 71.
Application for Public Examination§
27.

Upon the making of a receiving order, the Official Receiver may, if he finds it necessary, apply to the Court with a request to conduct a public examination of the debtor.

Fixing Date of Examination§
28.

If the Court has decided to conduct the examination, it shall fix the date thereof and the debtor shall appear for examination on that date.

Conduct of Examination§
29.

The Court, the Official Receiver, the trustee — if one has been appointed — and also any creditor who has filed a proof of debt or his representative duly authorised in writing, may at the examination question the debtor regarding his business, his property and the property of his family members and regarding his conduct and the causes of his failure.

Procedure at Examination§
30.
(a)The Court shall caution the debtor before taking his evidence that he is required to testify truthfully, failing which he shall be liable to the penalty prescribed by law, and sections 2, 4 and 5 of the Evidence Revision (Witness Caution and Abolition of Oath) Law, 5740-1980 shall apply.
(b)The debtor is required to answer every question asked by the Court or asked with its permission.
(c)The proceedings of the examination shall be recorded in minutes to such extent as the Court thinks fit, shall be read over to the debtor or read by the debtor himself and shall be signed by the debtor and by the Court; if the debtor refuses to sign, this shall be recorded in the minutes; the minutes shall be open to inspection by any creditor at reasonable times, and unless otherwise provided in this Ordinance in this regard, may serve as evidence against the debtor.
31.§

(Repealed — תיקון מס' 1, 1983)

Debtor who is Ill [15(10)]§
32.

If the debtor is mentally ill, or suffers from a mental or physical impairment or disability which, in the opinion of the Court, deprives him of his capacity to appear for public examination, the Court may by order dispense with the examination or direct that he be examined under such conditions, in such manner and at such place as appear to the Court to be appropriate.

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Section C: Composition or Arrangement after Receiving Order

Debtor's Proposal [16(1)]§
33.

Where a receiving order has been made, and the debtor or another person on his behalf or on behalf of his estate wishes to propose a composition for the payment of his debts or an arrangement of his affairs, he shall submit to the Official Receiver, within such time as the receiver has fixed, a proposal in writing containing the terms of the composition or arrangement and the particulars of the securities he offers.

Meeting to Consider Proposal [16(2)-(4), (20)]§
34.
(a)The Official Receiver shall send to every creditor a copy of the debtor's proposal and a report thereon, and shall thereafter hold a meeting of creditors, and if at such meeting a majority in number and three-quarters in value of the plaintiffs present and voting, in person or by agent, decide to accept the proposal, it shall be deemed as if all the creditors had duly accepted it, and upon its approval by the Court — it shall be binding on all of them.
(a1)Notwithstanding the provisions of subsection (a), the Court may, in special cases and for reasons to be recorded, approve a debtor's proposal under this section, if at the meeting of creditors a majority in number of the plaintiffs present and voting, in person or by agent, who hold more than half the value of the debts represented in the vote, decide to approve the proposal.
(b)The debtor may at the meeting amend the terms of his proposal if in the opinion of the Official Receiver the amendment is likely to benefit the body of creditors.
(c)Any creditor who has proved his debt may consent to the proposal or object to it in writing, in the prescribed form, which shall be sent to the Official Receiver so as to reach him not later than one day before the meeting, and such consent or objection shall have the same force as a vote of a creditor present at the meeting.
(d)The consent of a creditor to a composition or arrangement shall not release any person who would not have been released by a discharge order had the debtor been declared bankrupt.
Approval of Proposal by Court [16(5)-(14), (19)]§
35.
(a)A proposal accepted at a meeting of creditors may be submitted by the debtor or the Official Receiver to the court for approval, and notice of the time fixed for the hearing of the application shall be given to every creditor who has proved a debt.
(b)Every creditor who has proved a debt is entitled to have an objection to the application heard by the court, even if at the meeting of creditors that creditor voted in favour of acceptance of the proposal.
(c)For the purpose of approval of a composition or arrangement of joint debtors, the court may, on the recommendation of the Official Receiver, dispense with the public examination of one of them who is prevented from appearing for examination by reason of illness or absence from Israel.
(d)The court shall not approve a composition or arrangement that does not provide for the prior payment of all debts having priority in the distribution of a bankrupt's property.
(e)Before approving the proposal, the court shall hear a report from the Official Receiver on the contents of the proposal and on the conduct of the debtor, and shall hear any objection raised by a creditor or that creditor's representative.
(f)If the court finds that the debtor's proposal is reasonable and that it is likely to benefit the body of creditors as a whole, having regard to the bankruptcy proceedings, it may approve the proposal or make its approval subject to such additional conditions as it shall determine, including the provision of security for its performance; the court may refuse to approve a proposal of a debtor who, had the debtor been adjudicated bankrupt, the court would have been entitled to refuse to grant a discharge, on the ground that the circumstances referred to in section 63 applied to that debtor.
(g)Where facts are proved by reason of which the court, had the debtor been adjudicated bankrupt, would have been required to refuse to grant a discharge, or to suspend or impose conditions on the discharge, the court shall refuse to approve the proposal, unless it provides reasonable security that the percentages set out below shall be paid immediately or within a short time on every unsecured debt provable against the property of the debtor, including linkage differentials thereon up to the date of submission of the proposal for approval by the court:
(1)35% — if the composition was proposed within one year from the date of the receiving order;
(2)45% — if it was proposed after one year but before two years from the date of the order;
(3)55% — if it was proposed after two years but before three years from the date of the order;
(4)65% — if it was proposed after three years but before four years from the date of the order;
(5)80% — if it was proposed after five years or more from the date of the order,

provided that the court may, in special circumstances which shall be specified and recorded, fix different percentages or different periods from those specified in this subsection.

(h)(Repealed).
(i)Approval by the court of the proposal shall be given by affixing the seal of the court to the document containing the text of the composition or arrangement, or by including the text in an order of the court.
(j)A composition or arrangement accepted and approved as provided in this section shall be binding on the debtor and on all creditors in respect of every provable debt due to them from the debtor, but shall not release the debtor from liability under a judgment against the debtor in an action for maintenance.
(k)A certificate of the Official Receiver attesting that a composition or arrangement has been duly accepted and approved shall, in the absence of fraud, be conclusive evidence of its validity.
Enforcement [16(15) Opening]§
36.

On the application of any person interested, the court may enforce the provisions of a composition or arrangement made under this Section.

Annulment [16(16)]§
37.
(a)If any instalment payable under a composition or arrangement is not paid when due, or if the court is satisfied on sufficient evidence that, by reason of legal difficulties or any other sufficient cause, the composition or arrangement cannot be continued without injustice or undue delay to the creditors or the debtor, or if the court finds that its approval was obtained by fraud, the court may, on the application of the Official Receiver, the trustee or any creditor, adjudicate the debtor bankrupt and annul the composition or arrangement, without thereby affecting any sale, transfer, payment or act done in good faith under the composition or arrangement.
(b)Where the debtor is adjudicated bankrupt under this section, every debt incurred before the adjudication shall be provable in the bankruptcy if it is otherwise provable.
Application in Respect of Trustee [16(17)]§
38.

Where a trustee is appointed under a composition or arrangement to administer or distribute the property or business of the debtor in accordance with the composition, the provisions of sections 59 and 60 and Chapter V shall apply as if such trustee were a trustee in bankruptcy, and as if the expressions "bankruptcy", "bankrupt" and "adjudication" were to be read, as the context requires, as including a composition and arrangement, a debtor under a composition or arrangement, and an order approving a composition or arrangement.

Administration of Property under Composition or Arrangement [16(18)]§
39.

The provisions of Chapter III shall apply to a composition and to an arrangement, in so far as the nature of the matter and the contents of the documents admit, and the expressions "trustee", "bankruptcy", "bankrupt" and "adjudication" shall be construed as stated in section 38.

Scope of Composition and Arrangement [16(21)]§
40.

A composition or arrangement approved under the provisions of this Section shall not be regarded as extending to property acquired by the debtor after the day on which it was approved by the court, unless it contains an express provision that it shall so extend.

Limitation on Validity of Composition and Arrangement§
41.

A composition or arrangement, even if agreed upon and approved, shall not be binding on a creditor who did not consent thereto in respect of any debt or liability from which, under this Ordinance, the debtor would not have been released by a discharge order in bankruptcy.

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Section D: Adjudication of Bankruptcy

Adjudication Order [18(1)]§
42.

Where a receiving order has been made against a debtor and the creditors have resolved by ordinary resolution at their meeting that the debtor be adjudicated bankrupt, or where they have passed no resolution or have not assembled, or where a composition or arrangement has not been approved under Section C of this Chapter within the time fixed by the court, the court shall by order adjudicate the debtor bankrupt, and thereupon the property of the bankrupt shall be divisible among the creditors and shall vest in the trustee.

Restrictions on Bankrupt§
42a.
(a)A debtor who has been adjudicated bankrupt shall be a special restricted customer within the meaning of the Cheques Without Cover Law, 5741-1981.
(b)
(1)A debtor who has been adjudicated bankrupt shall not, by himself or through another on his behalf, use a debit card within the meaning of the Debit Cards Law, 5746-1986, unless prior written approval has been obtained from the trustee; the trustee may terminate a debit card contract on behalf of the debtor by giving written notice to the issuer in the name of the debtor of the termination of the contract; the date of termination of the contract shall be the date on which the notice was delivered to the issuer; where the trustee has notified the issuer of the termination of the debit card contract, the trustee shall also notify the debtor thereof;
(2)Where the trustee has decided not to terminate the engagement between the debtor and the issuer, the trustee shall notify the Official Receiver accordingly; the Official Receiver may, after hearing the position of the trustee and the debtor, instruct the issuer to terminate the debit card contract with the debtor, in place of the trustee; where such a decision is made, the provisions of paragraph (1) shall apply with the necessary modifications;
(3)The meanings of the terms in this section are as defined in the Debit Cards Law, 5746-1986.
(c)A debtor who has been adjudicated bankrupt shall not incorporate a corporation nor hold an interest in a corporation, directly or indirectly, including together with another or through another, unless prior approval has been given by the court or the trustee; for the purposes of this section, "holder of an interest" — as defined in the Securities Law, 5728-1968, and in respect of a corporation that has no share capital — a person who is a member of the corporation or a member of the committee or board of management of that corporation.
(d)Where a bankrupt has participated in the incorporation of a corporation or has held an interest in a corporation, the court may give directions regarding the cessation of the bankrupt's office or membership in the corporation; however, nothing in directions given under this subsection or in a breach of the provisions of subsection (c) shall derogate from the validity of the incorporation or from the validity of any legal act of a corporation in which the bankrupt was a founder or holder of an interest as aforesaid.
(e)Upon the grant of a discharge order, the annulment of the adjudication of bankruptcy, or the annulment of a receiving order made against the debtor, the restrictions imposed by virtue of this section shall lapse from the date of the order or the date of the decision of annulment, as the case may be; the court may lift the restrictions, in whole or in part, even before that date, for special reasons to be recorded, or if it has approved a proposal of composition or arrangement between the debtor and the creditors.
(f)The Minister may prescribe provisions regarding the adjustments required for the implementation of the provisions of this section.
Publication [18(2)]§
43.

Notice of adjudication of bankruptcy shall be published in Reshumot (Official Gazette) and in a daily newspaper in the prescribed manner; the notice shall state the name, address and occupation of the bankrupt, the court making the adjudication and the date of adjudication, and the adjudication shall take effect from the date of the order.

Official Receiver as Trustee§
44.

Upon adjudication of a debtor as bankrupt, the Official Receiver shall, by virtue of office, be trustee of the property of the bankrupt, and shall continue to act as such until the Official Receiver or another person is appointed and able to act as trustee.

Appointment of Trustee§
45.
(a)Upon adjudication of a debtor as bankrupt, or upon a decision by the creditors that the debtor be so adjudicated, the creditors may nominate a suitable person to be trustee of the property of the bankrupt; the Official Receiver shall notify the court of their nomination.
(b)If the creditors have not nominated a person as aforesaid within one month from the date of adjudication, or if the Official Receiver objects to their nomination, the Official Receiver shall propose to the court the appointment of another person to the office of trustee.
(c)The court shall consider the nominations brought before it as provided in subsections (a) and (b) and shall decide on the appointment of the trustee.
Security§
46.

The court may, before or after the appointment of a trustee, require that the trustee charge property or give security for the due performance of the trustee's functions and duties, and may at any time require the trustee to give additional security or release security given, in whole or in part.

Rules for Appointment of Trustee§
47.

The Minister, with the approval of the Constitution, Law and Justice Committee of the Knesset, may prescribe rules regarding the manner of appointment of a trustee and the manner of deliberation by the court on nominations brought before it for that purpose; the said rules shall prescribe the qualifications for appointment, other conditions which a trustee must fulfil for the purpose of appointment, and the manner of allocation of functions among candidates qualified for appointment.

Appointment of Committee of Inspection [20(1), (2)]§
48.
(a)The creditors entitled to vote may, by resolution at their first meeting or at any subsequent meeting, appoint a committee of inspection for the purpose of supervising the administration of the bankrupt's property by the trustee.
(b)The committee of inspection shall consist of not fewer than three and not more than five members, and every member shall be a creditor, or a person whom a creditor has appointed or intended to appoint as that creditor's authorised representative or proxy for voting, provided that a person shall not be qualified to act as a member of the committee of inspection unless the instrument of authorisation or proxy for voting is in that person's possession and after the proof of debt of the creditor has been filed and found to be provable.
Procedure of Committee of Inspection [20(3), (4)]§
49.
(a)The committee of inspection shall meet at such times as the trustee or any member of the committee may consider necessary.
(b)The committee may act by a majority of its members present at a meeting, provided that it shall not act unless a majority of its members are present at the meeting.
Vacation of Membership of Committee of Inspection [20(5)-(9)]§
50.
(a)Any member of the committee of inspection may resign therefrom by delivering to the trustee a written notice signed by that member.
(b)A member of the committee who becomes bankrupt, or who has entered into a composition or arrangement with creditors, or who has been absent from five consecutive meetings of the committee, shall vacate office.
(c)A member of the committee may be removed from office by ordinary resolution at a meeting of creditors of which seven days' prior notice has been given and which stated the purpose of the meeting.
(d)Where a member of the committee vacates office, the trustee shall immediately convene a meeting of creditors for the purpose of filling the vacancy, and the meeting may by resolution appoint another creditor or other person qualified therefor as provided in section 48(b).
(e)The continuing members of the committee, if they number at least two, may act even if a vacancy has occurred in its composition; and if they number fewer than five, the creditors may add to their number, provided that the total shall not exceed five.
In Absence of Committee [20(10)]§
51.

In the absence of a committee of inspection, the Official Receiver may, on the application of the trustee, do anything and give any direction or permission that the committee of inspection is empowered or required to do or give under this Ordinance.

Composition or Arrangement after Adjudication [21(1)]§
52.

After a debtor has been adjudicated bankrupt, the creditors may at any time resolve, by a majority in number and three-quarters in value of the claimants present and voting, in person or by agent, to accept a proposal of composition for the payment of the debts due to them in the bankruptcy or a proposal of arrangement in respect of the affairs of the bankrupt, and upon doing so the proceedings and their consequences shall be as in the case of a composition or arrangement before adjudication of bankruptcy.

Approval by Court [21(2)]§
53.
(a)Where the court has approved the composition or arrangement, it may make an order annulling the bankruptcy and vesting the property of the bankrupt in the bankrupt or in such other person as the court may appoint, and it may attach such conditions to the conveyance as it thinks fit.
(b)Where the court has made an order under this section without providing for the conveyance of the debtor's property, the property shall revert to the ownership of the debtor immediately after payment of the full amount of the composition.
Cancellation [21(3)]§
54.
(a)If a payment due under a compromise or arrangement is not paid on time, or if the Court is of the opinion that the compromise or arrangement cannot continue without causing injustice or unreasonable delay, or that its approval was obtained by fraud, the Court may, upon the application of an interested person, adjudicate the debtor bankrupt and annul the compromise or arrangement, without thereby affecting any sale, transfer, payment or anything else done in good faith under the compromise or arrangement.
(b)Where a debtor is adjudicated bankrupt under this section, every debt created before the date of adjudication shall be provable in the bankruptcy if it is otherwise provable.
Power to Annul Adjudication§
55.
(a)If the Court is of the opinion that a particular debtor ought not to have been adjudicated bankrupt, or if it is proved to its satisfaction that the debts of the bankrupt have been paid in full, it may, by order, upon the application of any interested person, annul the adjudication, and the annulment shall be published as soon as possible in Reshumot (Official Gazette) and in a daily newspaper.
(b)The Court may annul the adjudication of bankruptcy if it is satisfied that the debtor has abused the bankruptcy proceedings; the annulment of the adjudication shall not remove from the bankrupt any statutory disqualification arising from the adjudication, unless the Court has decided to remove it.
(c)For the purposes of this section —
(1)a conditional waiver of a debt proved in bankruptcy shall not be regarded as full payment of the debt;
(2)a debt that is disputed by the debtor shall be regarded as paid in full if the debtor has given an undertaking, in an amount and with security approved by the Court, to pay the sum that may be adjudged in proceedings on the payment of the debt or relating thereto, together with the costs of those proceedings;
(3)a debt owed to a creditor who cannot be found or identified shall be regarded as paid if it has been paid in full into the court treasury.
(d)The annulment of an adjudication of bankruptcy shall not affect the validity of any sale, transfer or payment in good faith, or of any act done for that purpose, carried out by the Official Receiver, the trustee or any other person acting by virtue of their authority, or by the Court; however, the property of the debtor shall be conveyed to a person appointed by the Court, and if no such person is appointed, it shall revert to the ownership of the debtor to the extent of the debtor's right or interest therein and subject to such conditions as the Court thinks fit to prescribe by order.

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