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Insolvency and Economic Rehabilitation Law, 5778-2018

חוק חדלות פירעון ושיקום כלכלי, תשע"ח-2018

Published: 2018-03-15Consolidated Hebrew text as of 2026-08-02 · Last amended 2026-07-28✓ Amendment status checked against the Knesset legislation record on 2026-09-17
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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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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.

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Part 4: The Creditors' Claims

Chapter I: Debt Claims

Right of a Creditor under an Approved Debt Claim§

209.

A debt claim in respect of a past debt approved by the trustee pursuant to the provisions of this Chapter confers upon the creditor of the past debt a right to a share of the assets of the creditors' fund.

Submission of Debt Claims§

210.
(a)A creditor of a past debt may submit a debt claim to the trustee within six months of the date of publication of the order opening proceedings; the trustee may request the creditor to complete particulars relating to the debt claim if he considers that this is necessary for the purpose of adjudicating upon it.
(b)Notwithstanding the provisions of subsection (a), where a past debt arises after the grant of the order opening proceedings, including a debt to the National Insurance Institute arising from the payment of a benefit pursuant to Chapter VIII of the National Insurance Law, the debt claim shall be submitted within 45 days of the date on which the debt arose or until the end of the period prescribed in subsection (a), whichever is the later.
(c)The trustee may extend the period for the submission of a debt claim if he finds that circumstances exist by reason of which the creditor was unable to submit the claim in time and that it is just to do so, having regard, inter alia, to the stage of the proceedings at which the application was submitted.
(d)In respect of an asset subject to a fixed charge (security interest), a debt claim of a creditor shall also include details of the asset charged in his favour and an estimate of its value as far as possible; the Minister, with the approval of the Constitution, Law and Justice Committee, may prescribe provisions concerning the estimate of the value of the charged asset, including the manner in which it shall be prepared and the circumstances in which it may be altered.
(e)From a debt claim of an employee, the amount received as a benefit pursuant to Chapter VIII of the National Insurance Law shall be deducted; the Minister may prescribe provisions in respect thereof, including provisions concerning the manner of submission of a debt claim by an employee and concerning the trustee's duty of reporting to the National Insurance Institute.
(f)The Minister shall prescribe provisions concerning the manner of submission of a debt claim, the particulars to be included therein, including particulars concerning linkage differentials, interest and late payment additions, and the documents to be attached thereto.

Adjudication of Debt Claims§

211.
(a)The trustee shall examine a debt claim submitted to him and shall decide whether to approve or reject it.
(b)The trustee may, with the approval of the court, reject a debt claim in respect of a debt for which a judgment has been given, if he finds that one of the following has occurred:
(1)the judgment was given on the basis of conduct by the parties that amounts to deceit or collusion;
(2)other circumstances existed in which the judgment was given without an examination of the substance of the matter and, by reason thereof, there is a real concern that it does not accurately reflect the individual's debt.
(c)The trustee shall notify the creditor who submitted the debt claim of the decision on the debt claim; where the debtor is an individual, the trustee shall also notify the individual of the decision.
(d)A debt claim submitted in respect of a past debt arising from a payment imposed in administrative proceedings or criminal proceedings, or that is a debt to the National Insurance Institute arising from the payment of a benefit pursuant to Chapter VIII of the National Insurance Law, shall be approved by the trustee unless it was submitted out of time or did not include all the particulars and documents required pursuant to section 210(f).
(e)The Official Receiver may exempt the trustee from examining debt claims if he finds that the assets of the creditors' fund are insufficient to make a distribution to the creditor submitting the debt claim and to the other creditors of the same rank in the order of repayment.

Past Debt the Date of Repayment of Which Falls after the Grant of the Order Opening Proceedings§

212.

A creditor may claim a past debt the date of repayment of which falls after the grant of an order opening proceedings as if it were immediately due for repayment on the date of the grant of the Order; for the purpose of the order of repayment, interest that has accrued or was to have accrued from the date of the grant of the Order onwards shall be regarded as interest accrued in insolvency proceedings.

Assessment of a Past Debt That Is Unascertained§

213.

Where a past debt is an unascertained debt, the trustee shall assess it.

Right of Inspection§

214.

Any interested party in insolvency proceedings may inspect the debt claims submitted by creditors and the trustee's decisions thereon; the Official Receiver may prescribe provisions concerning the right of inspection under this section.

Appeal against a Decision on a Debt Claim§

215.

A person who considers himself aggrieved by the trustee's decision on a debt claim may submit an appeal against the decision to the court.

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Chapter II: The Creditors' Fund

Section A: The Assets Included in the Creditors' Fund

Assets of the Creditors' Fund§
216.

The assets of the creditors' fund shall include —

(1)in respect of a debtor that is a corporation — every asset of the corporation at the time of the grant of the order opening proceedings and every asset that is conveyed to the corporation until the time of its dissolution, and if an economic rehabilitation plan has been approved in respect of the corporation — every asset of the corporation in accordance with the provisions of the plan;
(2)in respect of a debtor who is an individual — every asset of the individual at the time of the grant of the order opening proceedings, every asset conveyed to him until the grant of an economic rehabilitation order, and every asset included in the assets of the creditors' fund in accordance with the economic rehabilitation order.
Assets Not Forming Part of the Creditors' Fund§
217.

Where the debtor is an individual, the following shall not be included in the assets of the creditors' fund —

(1)assets listed in the Second Schedule;
(2)entitlements to a benefit to which the provisions of section 303 or 311 of the National Insurance Law apply, a provision in another enactment that applies those sections or that prescribes an arrangement similar to the arrangement prescribed therein.
An Asset Seized in Collection Proceedings That Have Not Been Completed§
218.

Where an asset of the debtor has been seized in the framework of collection proceedings and, at the time of the grant of the order opening proceedings, the full proceeds of its sale have not yet been received by the creditor, the following provisions shall apply:

(1)if the asset has not yet been sold — the asset shall be included in the assets of the creditors' fund and the expenses incurred in its seizure and sale shall constitute a first charge (security interest) on the asset;
(2)if the asset has been sold — the proceeds received from its sale, after deduction of the expenses incurred in its seizure and sale, shall be included in the assets of the creditors' fund.

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Section B: Avoidance of Transactions that Diminish the Creditors' Fund

Avoidance of an Act Conferring Preference on Creditors§
219.
(a)
(1)The court may order the avoidance of an act that resulted in the repayment of a debt to a creditor or in his advancement in the order of repayment, and that was performed before the grant of an order opening proceedings, including an act performed in the framework of collection proceedings and including a transfer of ownership in an asset or the charging of an asset, where all of the following conditions are met (in this Section — an act conferring preference on a creditor):
(a)the date of performance of the act falls within the period commencing three months before the date of submission of the application for an order opening proceedings, and in respect of a creditor who is a person close to the debtor — one year before that date;
(b)at the time of performance of the act, the debtor was insolvent;
(c)by reason of the act, a larger portion of the debt will be repaid to that creditor than the portion that would have been repaid to him in the framework of the insolvency proceedings pursuant to the order of repayment;
(2)for the purpose of this section, the debtor is presumed to have been insolvent during the period referred to in paragraph (1)(a), unless the contrary is proved.
(b)The court shall not avoid an act conferring preference on creditors where one of the following applies:
(1)the debtor received, at the time of performance of the act or at a time proximate thereto, adequate consideration in the circumstances of the matter for the act performed; for this purpose, the repayment of the debt in itself shall not be regarded as adequate consideration;
(2)the performance of the act was in the ordinary course of business of the debtor and the debt repaid by reason of the act arose in the ordinary course of business of the debtor; for the purpose of a payment arrangement for the spreading of a debt to the Tax Authority, a local authority or the National Insurance Institute — the fact that the spreading arrangement was made on a one-off basis shall not, in itself, be regarded as an act not in the ordinary course of business;
(3)in respect of a debtor who is an individual — the debt repaid is a debt to a person who is not a person close to the debtor in an amount not exceeding NIS 5,897.43, and in respect of a debt on account of rent or a continuous service — the said amount shall be calculated on the basis of the monthly payment;
(4)in respect of a debtor who is an individual — the debt repaid is a maintenance debt the liability for which is pursuant to a judgment.
(c)Where a debt has been assigned from a creditor to another person before the grant of an order opening proceedings, and by reason of the assignment the assignee became, in respect of that debt, a creditor with special repayment rights to whom the provisions of Chapter VI: Creditors with Special Repayment Rights apply, the court may order that the special repayment rights under that Chapter shall not be conferred upon the assignee in respect of that debt, provided that the conditions of subsection (a) are met in respect of the assignment.
Avoidance of an Act that Diminishes Assets from the Creditors' Fund§
220.
(a)The court may order the avoidance of an act performed before the issuance of an order to commence proceedings, by reason of which an asset was diminished from the assets of the creditors' fund, if all of the following conditions are met (in this Section – an act that diminishes an asset from the creditors' fund):
(1)the act was performed without consideration or for consideration that is not commensurate in the circumstances of the matter;
(2)the date on which the act was performed falls within the period commencing two years before the date of submission of the application for an order to commence proceedings, and in respect of an act for the benefit of a related party – four years before that date;
(3)at the time of performance of the act the debtor was in insolvency or the performance of the act brought the debtor to insolvency.
(b)For the purposes of this Section, a debtor is presumed to have been in insolvency during the period referred to in subsection (a)(2), unless the contrary is proved.
Avoidance of an Act to Fraudulently Transfer Assets§
221.

The court may order the avoidance of an act that diminishes an asset from the creditors' fund that was performed with the aim of fraudulently transferring the asset from creditors, even if at the time of performance of the act the debtor was not in insolvency, provided that the date on which the act was performed falls within the period commencing seven years before the date of submission of the application for an order to commence proceedings and ending on the date of issuance of the Order (in this Section – an act to fraudulently transfer an asset); in ordering as aforesaid, the court may take into account whether the person to whom the asset was transferred received it in good faith.

Preservation of the Rights of a Third Party§
222.

The avoidance of an act conferring a preference on a creditor, an act that diminishes an asset from the creditors' fund or an act to fraudulently transfer an asset, under this Section, shall not derogate from the rights of a third party who acquired, after the performance of the act, a right in the asset in respect of which it was performed, in good faith and for consideration.

Consequences of Avoidance of an Act§
223.
(a)Where the court has avoided under this Section an act conferring a preference on a creditor, an act that diminishes an asset from the creditors' fund or an act to fraudulently transfer an asset, the assets restored by reason of the avoidance shall be included in the creditors' fund.
(b)Notwithstanding the provisions of subsection (a), where the restoration of the asset to the creditors' fund is impossible or unjust in the circumstances of the matter, or where the asset was acquired by a third party as referred to in section 222 – the person for whose benefit the act was performed shall pay the value of the asset as the court shall direct.

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Chapter III: Collection and Administration of the Assets of the Creditors' Fund

Collection of the Assets of the Creditors' Fund§

224.
(a)Upon the issuance of an order to commence proceedings, the trustee shall act in accordance with the trustee's powers under Chapter VI: The Trustee – Appointment, Role and Powers, of Part 2 and Chapter VI: The Trustee – Appointment, Role and Powers, of Part 3, in order to take into the trustee's possession or control the assets of the debtor and the documents relating to the insolvency proceedings to which the debtor is entitled to receive.
(b)In the course of collecting the assets of the creditors' fund, the trustee shall examine, inter alia, the validity of charges (security interests) imposed on such assets and the existence of causes of action available to the debtor that may add assets to the creditors' fund.

Notice of Assets and Documents of the Debtor§

225.

A creditor who holds an asset or a document in which the debtor has a right that relates to the insolvency proceedings and who becomes aware of the issuance of an order to commence proceedings in respect of the debtor, shall notify the trustee, within 21 days of the date on which the creditor became aware of the issuance of the Order, of the existence of such asset or document, and shall act in accordance with the trustee's instructions; the Minister may prescribe provisions regarding a notice under this section, including regarding the manner of its delivery.

Administration of the Assets of the Creditors' Fund§

226.
(a)The trustee shall administer the assets of the creditors' fund in an efficient and optimal manner for the preservation and enhancement of their value, in accordance with the provisions prescribed by the Official Receiver.
(b)Where the debtor is an individual, the trustee may, with the approval of the Official Receiver, enlist the individual's assistance for the purpose of administering the assets of the creditors' fund.
(c)The trustee shall deposit the funds received in the course of the insolvency proceedings that are intended for distribution to creditors, at the place, in the manner and at the times as the Official Receiver shall direct; the Official Receiver may prescribe provisions regarding the manner of investment of such funds.
(d)Where the trustee has withheld funds contrary to the provisions of subsection (c), the trustee shall pay shekel interest as defined in the Interest and Linkage Law, 5721-1961 on the funds withheld.
(e)The trustee shall not deposit in the trustee's private account any sum received as trustee in the framework of the insolvency proceedings.

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