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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 III: Administration of Property

Section A: Proof of Debts

Provable Debts [30(3)]§
71.
(a)Debts and liabilities, present or future, certain or contingent, applicable to the debtor on the day of the making of the receiving order, or which will apply to the debtor before the debtor's discharge by reason of an obligation arising before the making of the order, shall be provable debts in bankruptcy. Debts and liabilities in foreign currency shall be calculated according to their value in Israeli currency on the day of the making of the order.
(b)A creditor may file a proof of debt within six months from the day of the making of the receiving order, in the manner and form prescribed by the Minister; the Official Receiver in the capacity of trustee over the property of the debtor, or the trustee, may, for special reasons to be recorded, extend the period for filing a proof of debt of a creditor for such period as they shall determine in their decision, if they are satisfied that the creditor was unable to file the proof within the prescribed time.
Exceptions [30(1), (2)] [5736]§
72.

Notwithstanding the provisions of section 71 —

(1)claims for unliquidated damages not arising from a contract or promise, and claims for maintenance due under a judgment the time for payment of which falls after the making of the receiving order, are not provable debts in bankruptcy;
(2)a person who had knowledge of an act which could have been used to present a bankruptcy petition against the debtor on the day on which the petition was presented by virtue of which the debtor was adjudicated bankrupt, shall not be entitled to prove under the receiving order any debt or liability which applied to the debtor after the day on which that act became known to such person.
Valuation [30(4)–(7)]§
73.
(a)A debt or liability which is provable but whose value is not liquidated, whether by reason of its being contingent or for any other reason — the trustee shall assess it, and any person aggrieved by the assessment may appeal to the Court.
(b)If the Court is of the opinion that a debt or liability does not admit of fair estimate, it may so determine, and upon so doing the debt or liability shall no longer be a provable debt for the purposes of this Ordinance.
(c)If the Court is of the opinion that the debt or liability does admit of fair estimate, it may direct that its value be assessed before the Court and give such directions as are necessary for that purpose, and the amount so determined shall be a provable debt.
Mutual Credit and Set-Off§
74.
(a)Where there have been mutual credits, mutual debts or other mutual dealings between a debtor against whom a receiving order has been made and any person claiming to prove a debt under the order, an account shall be taken of what is due from each party to the other, the sum due from one party shall be set off against the sum due from the other party, and only the balance of the account, and no more, shall be claimed or paid, as the case may be; the provisions of this section shall not entitle any person to a set-off against the property of the debtor if at the time of giving credit to the debtor that person knew that the debtor had committed an act which could have been used to present a bankruptcy petition against the debtor on the day on which a petition was presented by virtue of which the debtor was adjudicated bankrupt.
(b)The determination of which dealings are capable of being set off under this section shall be made according to their state on the day on which the receiving order was made.
Interest or Linkage up to the Receiving Order§
75.

In respect of any debt in a fixed sum in regard to which there is no agreement to pay interest or other compensation for delay in payment, and the time for payment of which had already passed on the day of the making of the receiving order and which is provable in bankruptcy, the creditor may claim thereon interest or linkage differentials or linkage differentials and interest for the period from the time for payment fixed in the document until the date of the order, and if no time for payment was fixed in the document — for the period from the day on which notice was given to the debtor until the date of the order, provided that the notice stated that interest or linkage differentials or linkage differentials and interest as aforesaid would be demanded of the debtor.

Debt Not Yet Due§
75a.

In respect of a debt the time for payment of which had not yet arrived on the day of the making of the receiving order, the creditor may prove for it as if it were immediately payable, and shall be entitled to dividends equally with the other creditors, subject to a deduction of interest to be calculated from the day of declaration of the dividends until the time at which the debt would have been payable under the terms upon which it was created.

Equality in Payment of Debts [33(7)]§
76.

Claims admitted under this Ordinance shall be paid, subject to the provisions thereof, pari passu according to their amounts and without any preference.

First Charges [33(1), (4)]§
77.

The costs of administration of the property of a bankrupt, including court fees, shall be a first charge on the property, and if not actually paid before any debt, a sufficient sum shall be retained for their payment out of the property available for distribution; subject thereto, the debts specified in the next section shall be paid without delay as soon as the property of the debtor is sufficient to pay them.

Priority [33(2)] [5713, 5725]§
78.

The debts specified hereunder shall, in the distribution of the property of a bankrupt, have priority over all other debts in the following order of preference:

(1)
(a)wages of employment within the meaning of the Wage Protection Law, 5718-1958, due to an employee in respect of the period prior to the presentation of the bankruptcy petition, provided that the total wages entitled to priority shall not exceed NIS 25,630 in respect of wages of employment;
(b)if after the commencement of a tax year an adjustment takes effect, the amount specified in sub-paragraph (a) shall be increased by the rate of the adjustment from the day of commencement of the adjustment; the said increase shall remain in force until 31 December next following;

For this purpose, "tax year", "adjustment" and "rate of adjustment" — as defined in the National Insurance Law [Consolidated Version], 5728-1968 (hereinafter — the Insurance Law);

(c)the amount specified in sub-paragraph (a) shall be varied each year on 1 January in accordance with the rate of fluctuation of the average wage as defined in the Insurance Law;
(d)the Minister of Labour and Welfare shall publish in Reshumot (Official Gazette) a notice of the changes in the amount specified in sub-paragraph (a) that take effect by virtue of sub-paragraphs (b) and (c), rounded to the nearest ten shekels;
(2)any sum deducted by the bankrupt at source from wages of employment pursuant to the Income Tax Ordinance and not paid to the assessing officer;
(3)the debts specified hereunder, which shall rank equally with one another and shall be paid in full, and if the property of the bankrupt is insufficient to pay them all in full the payments shall be reduced proportionately:
(a)rates due from the bankrupt on the day of the making of the receiving order and to which the bankrupt became liable, or the time for payment of which arrived, within the 12 months preceding that day; "rates", for this purpose — municipal taxes, taxes of local councils and contributions which are in the nature of taxes imposed under the Religious Communities (Organisation) Ordinance;
(b)taxes payable to the State Treasury assessed and imposed on the bankrupt up to the last 31 December before the day of the making of the receiving order and the total of which does not exceed the assessment for one year, and other taxes payable to the State Treasury to which the bankrupt became liable, or the time for payment of which arrived, during the 12 months preceding that day;
(c)rent for not more than one year before the day of the adjudication order, due to a landlord in respect of premises and land leased by the bankrupt;
(d)any money due in respect of arrears in compliance with maintenance orders made or enforced by a competent court.
(4)The Court may, if for special reasons to be recorded it finds it just to do so in the circumstances of the case, direct that priority not be given to the debts referred to in paragraphs (1) and (3), in whole or in part.
Law Applicable to Insolvent Deceased [33(5)]§
79.

Where a person dies insolvent, the provisions of sections 76 to 82 shall apply to such person as if the person were a bankrupt, and for this purpose the day of death shall take the place of the day of the making of the receiving order.

Law Applicable to Bankrupt Partners [33(6)]§
80.
(a)The joint property of partners shall be applied first in payment of their joint debts, and the separate property of each partner shall be applied first in payment of such partner's separate debts.
(b)If there is a surplus in the separate property, it shall be dealt with as if it were part of the joint property; if there is a surplus in the joint property, it shall be dealt with as if it were part of the property of each partner in proportion to such partner's right and interest in the joint property.
(c)Where there is no joint property and there is no solvent partner who can be sued, the creditors from the joint property may prove against the separate property of each partner and receive dividends therefrom, ranking equally with every creditor from the separate property; but where the liability of a partner is limited, the provisions of this section shall not extend that partner's liability to pay the debts of the partnership out of such partner's separate property.
Interest or Linkage from the Date of the Receiving Order§
81.

The trustee may, in the trustee's discretion, determine that to all debts proved in bankruptcy there shall be added — from the day of the receiving order until actual payment — interest or linkage differentials or linkage differentials and interest.

Savings Provisions [33(9)]§
82.

The provisions of sections 76 to 81 shall not derogate from the provisions of any law relating to companies or cooperative societies.

Restriction on Claims by Spouses§
83.
(a)Where a married woman is adjudicated bankrupt, any money lent to her by her husband and any property deposited with her by him for the purposes of her business shall not entitle the husband to claim a dividend thereon as a creditor until the claims of her other creditors for valuable consideration given in money or money's worth have been satisfied.
(b)Where a husband is adjudicated bankrupt, any money lent to him by his wife and any property deposited with him by her for the purposes of a business carried on by him, or otherwise, shall be deemed to be his property, and she shall not be entitled to claim a dividend thereon as a creditor until the claims of his other creditors for valuable consideration given in money or money's worth have been satisfied.

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Section B: Property Available for Payment of Debts

Commencement of Bankruptcy§
84.
(a)The bankruptcy of a debtor, whether on the debtor's own petition or on the petition of a creditor or creditors, shall be deemed to relate back to and to have commenced at the time when the act of bankruptcy was committed by reason of which the receiving order was made against the debtor.
(b)Where the debtor has committed several acts of bankruptcy, the bankruptcy shall be deemed to relate back to and to have commenced at the time of the first act committed within the three months preceding the day on which the bankruptcy petition was presented.
(c)The fact that an act of bankruptcy preceded the debt of the petitioning creditor shall not invalidate the bankruptcy petition, the receiving order or the adjudication.
Divisible Property [37 in fine]§
85.

The property of a bankrupt shall comprise, subject to the provisions of section 86 —

(1)all property belonging to or vested in the bankrupt at the commencement of the bankruptcy, and all property acquired by or vested in the bankrupt before the discharge;
(1a)the trustee shall not redeem moneys due to the debtor by virtue of membership in a provident fund as defined in the Supervision of Financial Services (Provident Funds) Law, 5765-2005, except after obtaining the approval of the Court therefor; the Court may order the redemption of such moneys, in whole or in part, provided that if the provident fund moneys are for the purpose of a pension and the time for their payment as a pension has not yet arrived, the Court shall not order their transfer to the trustee;
(1b)the trustee shall not redeem moneys due to the debtor under a savings plan the time for redemption of which has not yet arrived, except after obtaining the consent of the Official Receiver;
(1c)the Court or the Official Receiver shall not decide on the redemption of moneys as referred to in paragraphs (1a) and (1b) except after affording the debtor an opportunity to submit arguments;
(2)the power to exercise any right in respect of property, or to take proceedings for the purpose of exercising that right, in such manner as the bankrupt could have exercised for the bankrupt's own benefit at the commencement of the bankruptcy or before the discharge;
(3)movable property which, at the commencement of the bankruptcy, was in the possession or under the control of the bankrupt for the purposes of the bankrupt's trade, with the consent and permission of the true owner and in circumstances which made the bankrupt appear to be the owner of such movable property; however, a claim that is not a debt due or becoming due to the bankrupt in the course of the bankrupt's trade shall not be deemed movable property for the purposes of this section.
Property Not Available for Distribution§
86.

The property of a bankrupt shall not include —

(1)foodstuffs sufficient for the maintenance of the debtor and members of the debtor's family residing with the debtor, for a reasonable period;
(2)clothing, beds, bedding, medical equipment, medicines, eating utensils, kitchen utensils and other household goods, all of which are essential to the debtor and members of the debtor's family residing with the debtor;
(3)items required as religious articles for the debtor and members of the debtor's family residing with the debtor;
(4)machines operated by the debtor personally, tools, instruments and other movable property, as well as animals without which the debtor cannot carry on the debtor's profession, craft, trade or work which are the source of livelihood of the debtor and members of the debtor's family, provided that their value does not exceed a prescribed amount;
(5)if the debtor is a person with a disability — tools, instruments, machines, other movable property and animals necessary for the debtor by reason of such disability;
(6)pets; for this purpose, "pet" — an animal kept in the home or on the premises of the debtor and not used for an activity of a commercial nature;
(7)one item of each type of movable property listed in the Schedule that is required by the debtor and members of the debtor's family living with the debtor, provided that its estimated value does not exceed an amount prescribed in Regulations; the Minister may, by Order, add to the Schedule types of movable property the expected proceeds of the sale of which do not justify the serious harm that would be caused by their sale to the debtor or members of the debtor's family residing with the debtor, provided that their estimated value does not exceed an amount prescribed in Regulations; Regulations under this paragraph require the approval of the Constitution, Law and Justice Committee of the Knesset.
Protection of Dwelling§
86a.
(a)Where real property serving, in whole or in part, as a dwelling for the bankrupt, the bankrupt's spouse or members of the bankrupt's family residing with the bankrupt is included in the property of the bankrupt, the Court may order that it shall not be sold unless it has first been proved, to the Court's satisfaction, that the bankrupt, the bankrupt's spouse and members of the bankrupt's family residing with the bankrupt will have reasonable accommodation, or that an alternative arrangement has been made available to them.
(b)The Court may determine that the alternative arrangement shall consist of the provision of another dwelling, or the payment of compensation, or in any other manner.
(c)The provisions of this section do not apply to real property to which the laws of tenant protection apply, and nothing in this section shall derogate from those laws.
Status of Advocate's Fees§
87.
(a)Money paid in good faith by a debtor to the debtor's advocate on account of legal costs in opposing bankruptcy proceedings instituted against the debtor shall not be recoverable by the trustee by virtue of the adjudication, even if the advocate had knowledge of the acts of bankruptcy by reason of which the proceedings were instituted.
(b)Money paid in good faith by a debtor to the debtor's advocate on account of legal costs in criminal proceedings instituted against the debtor shall not be recoverable by the trustee by virtue of the adjudication, even if the advocate had knowledge of the acts of bankruptcy by reason of which the proceedings were instituted; but if the Court is of the opinion that the amounts paid are excessive, it shall determine what it considers to be the reasonable amount, and the trustee may recover the balance from the advocate.

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