Translation Notice — This is an English translation of a Hebrew law and may contain inaccuracies. In any dispute or legal matter, the original Hebrew text as published in Reshumot (ספר החוקים) is the sole authoritative and legally binding version.

Ordinance

Bankruptcy Ordinance [New Version]

פקודת פשיטת הרגל [נוסח חדש]

Division E: Supervision of the Debtor and His Assets

Assets and their Realization

preamble-2.

Assets and their Realization

Debtor's Duty of Disclosure

56.

(a)A debtor against whom a Receiving Order has been made (in this Section — the debtor) shall attend the first meeting of creditors, unless prevented from doing so by illness or other sufficient cause, and shall submit to examination and furnish such information as the meeting may require.

(b)Upon the reasonable demand of the Official Receiver, the special manager or the Trustee, or as may be prescribed by Regulations, or pursuant to a direction of the court by Order made in a special matter or made upon a special application by the Official Receiver, the special manager, the Trustee or any creditor or interested person, the debtor shall provide a statement of his assets, a list of his creditors and the debts owed to them and a list of his debtors and the debts owed to him, shall attend for examination regarding his assets and creditors, shall be present at other meetings of creditors, shall make himself available to the Official Receiver, the special manager or the Trustee at such times as he may be required, shall sign powers of attorney and other documents, and shall do all things concerning his assets and the distribution of their proceeds among his creditors.

(c)Upon the debtor being adjudicated bankrupt, he shall assist to the best of his ability in the realization of his assets and the distribution of their proceeds among his creditors.

649 Book of Laws 34 28 Elul 5740 09.09.1980

Circumstances for Arrest

57.

(a)The court may by Order addressed to a police officer, in any of the circumstances enumerated below, direct the arrest of a debtor, the seizure of books, papers, money and goods in his possession, and the detention of the debtor and all seized items in safe custody as prescribed until the court otherwise directs; and the circumstances are as follows:

(1)after a bankruptcy notice has been given pursuant to this Ordinance, or after a bankruptcy petition has been filed by or against the debtor, the court is satisfied that there is reasonable ground to believe that the debtor has absconded or is about to abscond with a view to avoiding payment of the debt in respect of which the bankruptcy notice was issued, or to avoiding service upon him of the petition, or to avoiding attendance at the hearing thereof or examination as to his affairs, or to avoiding, delaying or otherwise impeding bankruptcy proceedings against him; however, no arrest effected on the basis of a bankruptcy notice shall be valid unless the notice was served on the debtor prior to or at the time of the arrest;

(2)after a bankruptcy petition has been filed by or against the debtor, the court is satisfied that there is reasonable ground to believe that the debtor is about to remove his goods from their location with a view to preventing or obstructing the Official Receiver or a Trustee from seizing them, or that there is reasonable ground to believe that he has concealed or is about to conceal or destroy his goods, or any books, documents or writings which might be of benefit to his creditors in the course of the bankruptcy;

(3)after a bankruptcy petition has been served on the debtor or after a Receiving Order has been made against him, he has removed, without the permission of the Official Receiver or the Trustee, goods in his possession having a value exceeding half a shekel;

(4)the debtor has failed to attend an examination directed by the court without providing a reasonable excuse therefor.

(b)Any payment, compromise or security given after arrest under this Section shall not exempt from the provisions of this Ordinance regarding fraudulent preference.

Debtor

231]]

Redirection of Debtor's Mail

58.

Upon a Receiving Order being made against a debtor, the court may, on the application of the Official Receiver or the Trustee, direct and re-direct that any postal item addressed to the debtor at any place shall be forwarded or delivered by the Minister of Communications or an employee of his office — during such period as shall be specified in the direction, not exceeding three months — to the Official Receiver, the Trustee or to such other address as has been directed.

Debtor's Mail

Summons for Inquiry

59.

(a)On the application of the Official Receiver or the Trustee, the court may, upon a Receiving Order being made against the debtor, summon him, his spouse, or any person known or suspected to be holding any property of the debtor or any article belonging to him, or to owe him a debt as estimated, or who in the opinion of the court may be able to give information concerning the debtor, his affairs or his property; and the court may require such person to produce any document in his custody or possession relating to the debtor, his affairs or his property.

(b)A person so summoned who, after being offered a reasonable sum, fails to appear before the court at the appointed time or refuses to produce a document without lawful excuse which has been communicated to the court at its sitting and confirmed, may be directed by the court to be arrested and brought before it for examination.

Summons for Examination

60.

(a)The court may examine on oath, either orally or by written interrogatories, any person brought before it as aforesaid, regarding the debtor, his affairs and his property.

(b)Where a person admits in examination before the court that he owes a debt to the debtor, the court may, on the application of the Official Receiver or the Trustee, direct that he pay to them, at such time and in such manner as specified in the direction,

650 Book of Laws 34 28 Elul 5740 09.09.1980

the amount admitted or any part thereof, whether in full satisfaction of the amount in question or not, all as the court thinks fit, with or without the costs of the examination.

(c)Where a person admits in examination before the court that he is holding property of the debtor, the court may, on the application of the Official Receiver or the Trustee, direct that he deliver to them all or any part of the property, at such time and in such manner and on such terms as the court deems just.

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Division F: Discharge

preamble-3.

and notice of

Application for Discharge

61.

(a)A bankrupt may at any time apply to the court for a discharge.

(b)The court shall fix a day for the hearing of the application, provided that it shall not be heard until the public examination of the bankrupt has been concluded.

(c)Notice of the day of the hearing shall be published in the prescribed manner and shall be sent, at least fourteen days before the day fixed, to every person listed as a creditor in the debtor's statement of affairs.

(d)The application shall be heard in open court, unless the court has otherwise directed in accordance with the Regulations made under this Ordinance.

281(2) opening clause,

(7)closing clause]]

Hearing and Decision

62.

(a)The court, in hearing the application, may hear the Official Receiver and the Trustee, and any creditor, and may put questions to the debtor and receive evidence as it thinks fit, and it shall take into account the Official Receiver's report as to the conduct of the debtor and his affairs, including his conduct during the course of the Bankruptcy proceedings.

(b)The court may, subject to the provisions of Sections 63 and 64, grant an absolute order of discharge or refuse to grant one, or suspend the operation of a discharge for a specified period, or discharge subject to conditions with respect to any earnings or income that may accrue to the bankrupt thereafter or with respect to property acquired by him after he was adjudged bankrupt.

Discharge

(3)]]

Limitations on Granting Discharge

63.

(a)Where a bankrupt has been charged and convicted of an offence under this Ordinance or of any offence connected with his Bankruptcy, or where any of the facts enumerated in subsection (b) have been proved, the court shall do one of the following:

(1)refuse to grant a discharge;

(2)suspend the discharge for such period as it thinks fit;

(3)suspend the discharge until a dividend of at least 50% has been paid to the creditors;

(4)require the bankrupt, as a condition of discharge, to consent to a Judgment being entered against him in favour of the Official Receiver or the Trustee for the balance of provable debts in his Bankruptcy remaining unpaid at the date of discharge, and to payment of the balance out of the bankrupt's future earnings or out of property acquired by him after he was adjudged bankrupt, in the manner and on the conditions directed by the court; however, no execution proceedings shall be taken to enforce the Judgment without leave of the court, which shall be granted upon proof that since his discharge the bankrupt has acquired property or income available for the payment of his debts.

(b)The following are the facts limiting the grant of a discharge:

(1)the bankrupt's assets are not equal to 50% of his total unsecured liabilities — unless he has satisfied the court that the said state of affairs was caused by circumstances for which he cannot be held responsible;

651 Book of Laws 34 28 Elul 5740 09.09.1980

(2)the bankrupt has not kept, in the manner customary and proper for his business, accounting books showing sufficiently his business transactions and financial position during the three years immediately preceding his Bankruptcy;

(3)the bankrupt continued to carry on business after he knew he was insolvent;

(4)the bankrupt contracted a debt provable in Bankruptcy without having at the time reasonable grounds for expecting to be able to pay it;

(5)the bankrupt failed to account satisfactorily for any loss or deficiency of assets to meet his liabilities;

(6)the bankrupt brought about or contributed to his Bankruptcy by rash or hazardous speculation, by unjustifiable extravagance in his manner of living, by gambling, or by culpable neglect of his business affairs;

(7)the bankrupt caused unnecessary expense to his creditors by a frivolous or vexatious defence to an action rightfully brought against him;

(8)the bankrupt brought about or contributed to his Bankruptcy by incurring unjustifiable expense in bringing a frivolous or vexatious action;

(9)within the three months preceding the receiving Order, at a time when the bankrupt was unable to pay his debts as they fell due, he improperly preferred a creditor;

(10)within the three months preceding the receiving Order, the bankrupt incurred liabilities for the purpose of making his assets equal to 50% of his total unsecured liabilities;

(11)the bankrupt has previously been adjudged bankrupt, or has reached a compromise or arrangement with his creditors;

(12)the bankrupt has been guilty of fraud or fraudulent breach of Trust.

64.

Where two years have elapsed from the date of the grant of a discharge Order, and the bankrupt has satisfied the court that there is no reasonable prospect that he will be in a position to comply with the terms of the Order, the court may vary the terms thereof or of any Order substituted therefor, in such manner and on such conditions as it thinks fit.

261(2) condition]]

Variation of Order

65.

The powers to suspend a discharge and to attach conditions thereto may be exercised concurrently.

and to attach conditions concurrently

261(8)]]

Power to Suspend

66.

The court may grant a bankrupt, upon discharge, a certificate to the effect that the Bankruptcy was caused by unforeseen misfortune unaccompanied by misconduct on his part, so as to remove from him any disqualification by reason of Bankruptcy imposed by law and removable by such a certificate from the court; a refusal to grant such a certificate is subject to Appeal.

Disqualifying enactments

Certificate in Respect of

67.

A discharged bankrupt is required, notwithstanding his discharge, to assist at the request of the Trustee in the realisation of his assets vested in the Trustee and in their distribution; if he fails to do so, he shall be guilty of an offence under this Ordinance and the court may annul his discharge, but such annulment shall not affect the validity of any sale, transfer, payment or other thing duly done after the grant of the discharge and before its annulment.

bankrupt who has been discharged

Duties of Bankrupt

68.

For the purposes of this Division —

(1)the Official Receiver's report shall be prima facie evidence of everything stated therein;

(2)where the court is satisfied that in the realisation of the bankrupt's assets there has been realised, or is likely to be realised, or could with prudent realisation have been realised, an amount equal to 50% of his unsecured liabilities — and the report of the Official Receiver or of the Trustees shall be prima facie evidence thereof — his assets shall be deemed to be equal to 50% as aforesaid.

652 Book of Laws 34 28 Elul 5740 09.09.1980

281]]

Effect of Discharge

69.

(a)An Order of discharge shall release the bankrupt from all debts provable in Bankruptcy, except the following:

(1)a debt due under an obligation to abstain from an offence, or a debt due to the State by reason of a Fine;

(2)a debt or liability incurred by fraud to which the bankrupt was a party, or from which he obtained a release by such fraud;

(3)a liability under a Judgment against him in matrimonial maintenance proceedings, except to the extent and on the conditions that the court has expressly directed with respect to that liability.

(b)An Order of discharge shall be conclusive evidence of the Bankruptcy and of the validity of the proceedings therein, and in any proceedings brought against a bankrupt who has obtained an Order of discharge in respect of a debt from which he has been discharged by the Order, the bankrupt may plead that the cause of action arose before his discharge.

(c)An Order of discharge shall not release any person who, on the date of the receiving Order, was a partner of the bankrupt, or who was jointly with him a Trustee, obligor, or bound by Contract, or who was a surety or quasi-surety for him.

and discharge in respect of

fraudulent transfer

271]]

Prevention of Arrangement

70.

(a)In this Section, "fraudulent transfer" means any of the following:

(1)a transfer of assets in consideration of or before marriage as consideration therefor, at a time when the transferor was unable to pay all his debts without the aid of the assets included in the transfer;

(2)a covenant, by reason of marriage, to transfer in the future to the wife or children of the transferor, or for their benefit, money or property — excluding money and property belonging to or due to his wife — when on the day of marriage he had no right or interest therein.

(b)Where a person has been adjudged bankrupt, or has reached a compromise or arrangement with his creditors, after having made a fraudulent transfer of his assets, and the court is of the opinion that the transfer of assets was made in order to defraud or delay creditors, or was not justified by the state of the transferor's business at the time it was made, the court may refuse to grant an Order of discharge, or may suspend it, or attach conditions thereto, or may refuse to approve a compromise or arrangement, as the case may be, in the same manner as it would have been entitled to do had the debtor been guilty of fraud.

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