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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Chapter VI: Creditors with Special Repayment Rights
Section A: Secured Creditor
Secured Creditor§
243.
(a)A secured creditor is a creditor to whom the debt owed by the debtor is a secured debt.
(b)Where an order for the opening of proceedings has been made, a secured creditor may recover the secured debt from the asset charged in his favour, subject to the provisions of this Section and to the order of repayment.
(c)The secured debt shall include linkage differentials, interest and arrears supplement added up to the time of its repayment, except for an arrears supplement added from the date on which the order for the opening of proceedings was made.
(d)Where the amount of the secured debt is less than the consideration received from the realisation of the charged asset, the difference shall form part of the assets of the creditors' fund available for the repayment of the balance of the debts.
(e)Where, after repayment of the secured debt from the realisation of the charged asset, a balance of debt remains owing to the creditor, it shall have the same status as the debtor's debts that are not secured debts.
Restrictions Regarding a Floating Charge§
244.
(a)Where an order for the opening of proceedings has been made, the following restrictions shall apply regarding a floating charge:
(1)the floating charge shall apply, until the conclusion of the insolvency proceedings, only to assets of the debtor at the time the order for the opening of proceedings was made, as well as to the consideration for such assets or to assets substituted for them that are identifiable or traceable (in this section – the floating charge assets);
(2)a creditor secured by a floating charge may recover the secured debt from the floating charge assets in an amount not exceeding 75% of the consideration received from the realisation of the floating charge assets (in this section – the charge ceiling), and the following provisions shall apply:
(a)where the creditor secured by a floating charge has not been repaid the full secured debt by reason of the provisions of this section, the balance of the debt shall have the same status as the debtor's debts that are not secured debts;
(b)the balance of the value of the floating charge assets beyond the charge ceiling shall be applied towards the repayment of the general debts.
(b)In this section, "the consideration received from the realisation of the floating charge assets" – the consideration received from the realisation of the floating charge assets after deducting the expenses incurred in preserving their value, enhancing them and realising them.
Restriction on Realisation of a Charged Asset While the Debtor's Business is Being Operated§
245.
(a)Where an order for the opening of proceedings has been made and the court has directed, in respect of a debtor that is a corporation, that the corporation be operated for the purpose of its economic rehabilitation, or the Official Receiver has directed, in respect of a debtor that is an individual, that his business be operated pursuant to section 157, a secured creditor shall not realise the asset charged in his favour by a fixed charge, and in respect of a floating charge – it shall not crystallise, except with the approval of the court.
(b)The court shall approve the realisation of the asset charged by a fixed charge or the crystallisation of the floating charge where one of the following applies:
(1)the asset charged by a fixed charge or the asset to which the floating charge applies does not afford adequate protection to the secured creditor and no other means of ensuring such protection have been determined;
(2)the charged asset or the asset to which the floating charge applies is not required for the economic rehabilitation of a debtor that is a corporation or for maintaining the business of a debtor that is an individual as a going concern.
Redemption of the Charged Asset by the Trustee§
246.
The trustee may, at any time, redeem the charged asset; the provisions of the Pledge Law shall apply to the redemption of the charged asset, with the necessary modifications. The Minister, with the approval of the Constitution, Law and Justice Committee, may prescribe provisions in this regard.
Notice of Intention to Realise§
247.
(a)Without derogating from the provisions of section 245, a secured creditor wishing to realise an asset charged in his favour shall notify the trustee of his intention to do so, provided that he has submitted a proof of debt before giving the notice or together with it.
(b)Where a secured creditor has given notice as referred to in subsection (a), the trustee may, within 14 days of the date of receipt of the notice, redeem the charged asset as referred to in section 246.
Proceedings for the Realisation of a Charged Asset§
248.
(a)Where the trustee has not redeemed the charged asset within the period referred to in section 247(b), the following provisions shall apply regarding the realisation of the charged asset:
(1)where the estimated value of the charged asset submitted by the secured creditor pursuant to section 210(d) (in this subsection – the estimated value of the charged asset) is substantially higher than the secured debt – the asset shall be realised by the trustee;
(2)where the estimated value of the charged asset is not substantially higher than the secured debt – the asset shall be realised by the secured creditor;
(3)where the court finds that the estimated value of the charged asset submitted by the creditor is unreasonable or that the secured creditor has not submitted an estimate as aforesaid, the court may itself determine the estimate, and the provisions of paragraphs (1) or (2) shall apply to the realisation in accordance with the estimate determined by the court.
(b)Notwithstanding the provisions of subsection (a), the court may, on the application of a secured creditor, direct that the realisation of the charged asset be carried out by the secured creditor if it finds that this is justified in the circumstances of the case and that it will not harm the interests of the other creditors.
(c)In the realisation of a charged asset by the trustee pursuant to subsection (a), the trustee shall act in accordance with the instructions of the secured creditor; however, if the trustee is of the opinion that the instructions of the secured creditor are likely to harm the interests of the other creditors, he may apply to the court for instructions regarding his course of action.
(d)Where the court finds that there are circumstances justifying it, it may direct that the realisation of the charged asset by the secured creditor pursuant to subsection (a)(2) or (b) be carried out under the supervision of the trustee and subject to such conditions as the court may determine.
Pledge for an Obligation Owed to an Institutional Body§
249.
The provisions of sections 247 and 248 shall not apply to a pledge as referred to in section 17(3) of the Pledge Law, and the provisions of that Law shall apply to its realisation.
Distribution of the Consideration from the Realisation of a Charged Asset§
250.
(a)The consideration from the redemption or realisation of the charged asset shall be credited first to the account of the expenses incurred in preserving its value, enhancing it and realising it, and thereafter to each of the following components of the secured debt, in proportion to its relative share in the secured debt:
(1)the principal of the debt and linkage differentials, interest and arrears supplement added before the date on which the order for the opening of proceedings was made;
(2)linkage differentials and basic interest added from the date on which the order for the opening of proceedings was made until the repayment of the secured debt.
(b)Where the realisation of a charged asset has been completed and the proof of debt of the secured creditor has not yet been determined, the trustee may retain in his hands the consideration received from the realisation until the determination of the proof of debt or may require a guarantee from the secured creditor as a condition for transferring the consideration to him.
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Contact Us →Section B: Creditor Holding an Asset Subject to Retention of Title
Asset Subject to Retention of Title§
251.
An asset subject to retention of title is an asset in respect of which all of the following apply:
(1)the asset was sold to the debtor and transferred to his possession before the order for the opening of proceedings was made;
(2)ownership of the asset remained with the seller, pursuant to the sale agreement, until payment of the consideration therefor;
(3)the provisions of section 2(b) of the Pledge Law do not apply to the sale transaction.
Restriction on Transfer of Possession While the Debtor's Business is Being Operated§
252.
(a)Where an order for the opening of proceedings has been made and the court has directed, in respect of a debtor that is a corporation, that the corporation be operated for the purpose of its economic rehabilitation, or the Official Receiver has directed, in respect of a debtor that is an individual, that his business be operated pursuant to section 157, the owner of an asset subject to retention of title shall not obtain possession of the asset by reason of non-payment of the consideration therefor by the debtor, except with the approval of the court.
(b)The court shall approve the transfer of possession to the owner of an asset subject to retention of title where one of the following applies:
(1)the asset does not afford adequate protection to its owner and no other means of ensuring such protection have been determined;
(2)the asset is not required for the economic rehabilitation of a debtor that is a corporation or for maintaining the business of a debtor that is an individual as a going concern.
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Contact Us →Section C: Creditor Holding a Right of Lien
Right of Lien§
253.
A creditor who has a right of lien over an asset from among the assets of the creditors' fund, in respect of a past debt of the debtor, shall be deemed, from the date on which the order for the opening of proceedings was made, to be a person in whose favour the asset is charged as security for that debt; the provisions of this Law applicable to a secured creditor shall apply to such a creditor, all with the modifications set out in this Section.
Power to Order the Delivery of a Detained Asset§
254.
(a)The court may order a creditor holding an asset from among the assets of the creditors' fund over which he has a right of lien to transfer the asset to the trustee, provided that all of the following apply:
(1)the court has directed, in respect of a debtor that is a corporation, that it be operated for the purpose of its economic rehabilitation and the asset is required for that rehabilitation, or the Official Receiver has directed, in respect of a debtor that is an individual, that his business be operated pursuant to section 157 and the asset is required for maintaining the individual's business as a going concern;
(2)adequate protection has been given to the creditor.
(b)Where the asset over which a right of lien exists is a document required by the trustee for the purposes of the insolvency proceedings, the court may order its delivery to the trustee even if the conditions of subsection (a) are not met, and the debt in respect of which the lien applies, up to the amount of the customary consideration for the preparation of the document or as the court may determine, shall be deemed to be expenses of the insolvency proceedings; the provisions of this subsection shall not apply to a document that is a security as defined in the Companies Law or a bill of exchange as defined in the Bills of Exchange Ordinance.
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Contact Us →Section D: Creditor Holding a Right of Set-Off
Set-Off§
255.
A creditor may set off a past debt owed to him by the debtor against a past debt owed by him to the debtor, at their value at the date on which the order for the opening of proceedings was made, and submit a proof of debt for the balance, where one of the following applies:
(1)the debts of the debtor and of the creditor are interlinked;
(2)the incurring of mutual debts and reliance on the right of set-off are part of the ordinary course of business of the debtor or the creditor, and the past debt that the creditor seeks to set off arose in the framework of their mutual dealings;
(3)the debts are capable of being set off pursuant to the Tax Set-Off Law, 5740-1980, or pursuant to sections 312 or 315 of the National Insurance Law.
Notice of Right of Set-Off§
256.
A creditor holding a right of set-off shall notify the trustee of the existence of the right or its exercise within 30 days of the date on which he became aware of the making of the order for the opening of proceedings; the Minister shall prescribe provisions regarding the particulars to be included in the set-off notice and the documents to be attached thereto.
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Contact Us →Part 5: Status and Rights of Creditors
Status of Creditors§
257.
(a)In exercising their powers and performing their functions under this Law, the court, the Official Receiver and the trustee shall, as far as possible, take into account the position of secured creditors and unsecured creditors.
(b)The position of creditors who are not secured creditors shall be determined at a creditors' meeting or by the creditors' committee; where there is a conflict between the position of the creditors' meeting and the position of the creditors' committee, the position of the meeting shall prevail.
(c)The court may decide on categories of matters in respect of which the trustee shall not make a decision without first giving the creditors' committee an opportunity to express its position thereon.
Right of Inspection of Documents§
258.
(a)In insolvency proceedings of a corporation, the court may permit a creditor to inspect documents of the corporation or another document held by the trustee, if it finds that this is justified in the circumstances of the case and after having taken into account the harm to the privacy of any person mentioned in the document from the disclosure of personal details relating to him, and the court may set conditions and restrictions regarding the inspection of the information and its use.
(b)In insolvency proceedings of an individual, the Official Receiver may permit a creditor to inspect a document held by the trustee, if he finds that this is justified in the circumstances of the case and after having taken into account the harm to the privacy of any person mentioned in the document; for this purpose the Official Receiver shall give his mind to particulars of information that the individual has indicated include sensitive personal information pursuant to section 107(b) or 117(b), and the Official Receiver may set conditions and restrictions regarding the inspection of the information and its use.
(c)The provisions of this section shall not apply to information provided to the trustee by a banking corporation or by the Tax Authority pursuant to section 50 or 150.
(d)Nothing in the provisions of this section shall derogate from the provisions of section 152(c) or 281(e) regarding the minutes of an examination or inquiry conducted by the trustee.
Creditor's Right to Apply to the Court§
259.
A creditor may apply to the court with a request that it decide any question relating to his rights in the insolvency proceedings.
Convening a creditors' meeting§
260.
(a)The trustee may convene a creditors' meeting at any time in order to hear the creditors' position.
(b)The trustee shall convene a creditors' meeting, pursuant to a direction of the court or the Administrator, or at the request of the creditors' committee, or at the request of creditors who together hold at least 25% of the value of the debt claims, in order to report to the meeting on the trustee's actions or to hear the creditors' position.
First creditors' meeting§
261.
(a)In insolvency proceedings of a corporation, the trustee shall convene the first meeting of creditors within 30 days of the date on which the order to open proceedings was made, or at such other time as the court directs, unless the court or the Administrator has decided that, in the circumstances of the matter, convening such a meeting would not benefit the conduct of the proceedings.
(b)In insolvency proceedings of an individual, the trustee may convene the first meeting of creditors if the trustee considers that it would benefit the conduct of the proceedings.
(c)The trustee shall prepare, no later than seven days before the date of the convening of the first meeting, a preliminary report concerning the debtor's financial position and concerning the actions taken by the trustee up to the date of the convening of the meeting; the report shall be made available for inspection by creditors in such manner as the Administrator shall prescribe.
(d)At the first meeting the creditors shall decide on the extent of their involvement in the insolvency proceedings.
Procedures of the creditors' meeting§
262.
(a)The right to vote at the creditors' meeting shall vest in a creditor who is not a secured creditor and who has submitted a debt claim in accordance with the provisions of this Law, in proportion to the value of the debt claim submitted by that creditor.
(b)Where there is concern that the amount stated in a debt claim submitted by a creditor exceeds the amount of the debt owed to that creditor in practice, and that the amount was set with the intention of influencing that creditor's voting right, the trustee may examine the claim for the purpose of determining the creditor's voting right.
(c)A decision at the creditors' meeting shall be adopted by those voting at the meeting who together hold a majority of the value of the debt claims; for this purpose, "those voting" excludes those who abstained.
(d)A creditor shall exercise the right to vote at a creditors' meeting in good faith and in a customary manner, and shall refrain from abusing that creditor's power.
(e)The Minister, with the approval of the Constitution, Law and Justice Committee, may prescribe provisions concerning the procedures of the creditors' meeting, including provisions concerning the right to vote at the creditors' meeting and concerning voting by proxy.
Appointment of a creditors' committee§
263.
(a)The court may appoint a creditors' committee that shall represent the position of creditors who are not secured creditors and shall act to advance their interests in the insolvency proceedings (in this Part – the creditors' committee).
(b)The members of the creditors' committee shall be creditors or their representatives, and their number shall not exceed five, unless the court directs otherwise.
(c)Adequate representation shall be given in the creditors' committee to the classes of creditors; the court may alter the composition of the committee as decided upon by the creditors' meeting if it finds that adequate representation is not given to the classes of creditors.
(d)The first meeting of the creditors' committee shall be held within 30 days of the date of its appointment, or at such other time as the creditors' meeting decides.
(e)The Minister may prescribe provisions concerning the procedures of the creditors' committee; the creditors' committee shall determine its own procedures to the extent that they have not been prescribed by the Minister.
Hearing the creditors' committee's position§
264.
(a)The creditors' committee may present its position before the trustee, before the court or before the Administrator on any matter within the framework of the insolvency proceedings.
(b)Where a creditors' committee has been appointed, the trustee shall make a decision on the matters listed below only after having given the creditors' committee an opportunity to present its position within such period as the trustee directs in accordance with the circumstances of the matter and the needs of the proper and efficient conduct of the proceedings:
(1)bringing or defending legal proceedings on behalf of the debtor;
(2)employing a person to assist the trustee in conducting the insolvency proceedings;
(3)placing a charge (security interest) over an asset forming part of the insolvency estate;
(4)taking on new credit;
(5)a compromise with a creditor or a debtor of the debtor regarding the amount of the debt and the manner of its repayment that has a material effect on the extent of the assets of the insolvency estate;
(6)repayment of a debt to a certain class of creditors;
(7)any matter that the court has decided, pursuant to section 257(c), that the trustee must give the creditors' committee an opportunity to express its position on;
(8)any additional matter prescribed by the Minister.
(c)The court or the creditors' meeting may exempt the trustee in advance from the trustee's obligation to hear the position of the creditors' committee before making a decision on one or more of the matters listed in subsection (b).
(d)Where a creditors' committee has been appointed, the court shall make a decision regarding the trustee's remuneration only after having given the creditors' committee an opportunity to present its position.
(e)In every matter in respect of which the creditors' committee is to be given an opportunity to present its position pursuant to subsections (b) and (d), the secured creditors shall also be given an opportunity to present their position.
Demand for information by the creditors' committee and a secured creditor§
265.
(a)In insolvency proceedings in respect of a debtor that is a corporation, the creditors' committee may demand from the trustee any information in the trustee's possession that is required by the committee for the purpose of performing its function.
(b)If the trustee considers that information demanded from the trustee by the creditors' committee is not necessary for the committee for the purpose of performing its function, or that it may harm the corporation, the privacy of a person, or the insolvency proceedings, the trustee may apply to the court with a request to exempt the trustee from providing the information; the court may grant such an exemption or may set conditions for the provision of the information.
(c)In insolvency proceedings in respect of a debtor who is an individual, the Administrator may direct the trustee to provide information to the creditors' committee, at the committee's request, if the Administrator finds that it is justified in the circumstances of the matter and after taking into account the harm to privacy involved, and may set conditions and restrictions regarding the inspection of the information and its use.
(d)Any information that the creditors' committee may demand from the trustee pursuant to this section may also be demanded by a secured creditor in respect of information relating to the debtor's debt towards that creditor.
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