Quick Answer: Under the Assignment of Rights Law 5729-1969 (Chok Niun Zchuyot), an Israeli creditor (a bank, finance company, or commercial supplier) can transfer the right to collect your debt to a third party without your agreement. The assignment takes effect against you only from the moment you receive written notice. Once notified, you owe the debt to the new creditor, but every defense you held against the original creditor transfers with you: the right to dispute the amount, raise a set-off, or rely on an existing installment agreement. The new creditor cannot charge higher interest, add unauthorized fees, or restart the limitation period that was already running.

Getting a letter from an unfamiliar company claiming to own your Israeli bank debt is disorienting. For someone outside Israel who may not read Hebrew, and who last heard from the original creditor years ago, the immediate question is simple: do I actually owe these people money, and on what terms?

Israeli banks routinely sell portfolios of non-performing loans to specialized debt-buying companies. Commercial creditors assign unpaid invoices to factoring houses. Mortgage lenders offload distressed loan books. The legal mechanism in each case is debt assignment (niun zchuyot), and the rules that govern it sit in one statute most debtors have never heard of — the Assignment of Rights Law 5729-1969. Those rules determine whether you can dispute the claim, reduce what you pay, or hold the new creditor to the same terms your original lender agreed to.

1. What Is Debt Assignment Under Israeli Law?

A debt is a contractual right: the creditor's right to demand payment of a specified sum. That right can be transferred from one party to another through assignment. Unlike a novation, where a new contract replaces the old one, assignment just swaps the creditor. The debtor's obligations stay unchanged, and the debtor's consent is not required.

Israeli law distinguishes between two directions of assignment:

  • Assignment of rights (niun zchuyot) — the creditor transfers the right to receive payment. This is the mechanism relevant to debt sales.
  • Assignment of obligations (niun chiyuvim) — the debtor transfers their obligation to pay to a third party. This requires the creditor's consent and is not what happens when a bank sells your debt.

When a creditor assigns a debt, the new creditor steps into the shoes of the original for collection purposes. The underlying contract — interest rate, payment terms, dispute clauses — does not change. The assignee gets exactly what the original creditor held.

Assignment is common in several Israeli market contexts. Banks sell portfolios of delinquent personal loans and credit card balances to debt-buying firms. Factoring companies purchase outstanding commercial invoices from suppliers at a discount and then collect from the debtor. Mortgage lenders divest non-performing home loans. Suppliers of goods and services assign their trade receivables to financial intermediaries to free up working capital. In each case, the debtor wakes up one day owing money to someone they have never dealt with.

The primary statute is the Assignment of Rights Law 5729-1969 (Chok Niun Zchuyot). Fourteen sections, but the consequences run deep for anyone on the receiving end of a debt sale.

Section 1 establishes the general rule: a contractual right is transferable unless the contract itself prohibits assignment, the right is personal in nature, or a specific law excludes it. Consumer credit agreements and mortgage loan agreements in Israel typically do not contain effective anti-assignment clauses, which is why bank portfolio sales are legally straightforward even without the borrower's knowledge.

Section 2 addresses when the assignment takes effect relative to the debtor. The assignment is valid between the original creditor and the new creditor from the moment they agree — but it takes effect against the debtor only from the date the debtor receives written notice. Until notice is served, the debtor may legitimately continue paying the original creditor, and a payment made to the original creditor before notice discharges the debt even though the right has technically already moved to the assignee.

Section 4 contains the most important protection for debtors: the assignee acquires the right subject to all defenses the debtor could have raised against the original creditor at the time of notification. If you disputed the amount, had a counterclaim, held a right of set-off, or were operating under an installment agreement that the original creditor had accepted, all of those positions travel with the debt and are fully enforceable against the new owner.

Section 5 deals specifically with set-off. If, at the time of notification, you held a right to set off an amount the original creditor owed you against the assigned debt, that set-off right survives against the assignee — even after notification, provided the set-off right arose before you received notice.

Sections dealing with competing assignments address priority when the same right is assigned more than once. The first assignee to notify the debtor generally prevails, which gives practical urgency to the notification step from the new creditor's perspective and explains why legitimate debt buyers send notification promptly.

In Practice — Which Contracts Cannot Be Assigned?
Three categories of contractual rights resist assignment under Israeli law. First, rights that are explicitly non-transferable under the contract itself — though in practice, standard bank and finance agreements rarely include binding anti-assignment clauses for the creditor's rights (as opposed to restrictions on the debtor's side). Second, rights that are personal in nature: a right that depends on the specific identity of the creditor — such as a personal creative commission or an employment benefit — cannot be transferred. Third, rights excluded by specific statutes: child support obligations (mezonot) and maintenance rights are not assignable; public-law rights arising under tax assessments require specific ITA procedures. If you receive a notice of debt assignment and believe the right was non-transferable, the burden is on you to raise that argument — it does not protect you automatically.

3. The Notification Requirement: What You Must Receive

Section 2 of the Assignment of Rights Law is where the debtor's real protection sits. Until you receive written notice, the assignment does not affect you. After notice, you owe the debt to the new creditor, and paying the original one no longer clears it.

Israeli law requires that notice be in writing. There is no prescribed form, but the notice must convey enough information for the debtor to understand who now holds the debt and how to contact them. A bare letter saying "your debt has been sold" without identifying the assignee clearly would fail the notice requirement.

What adequate notice should contain:

  • The name and registered address of the assignee (new creditor)
  • A reference to the original debt: the creditor name, account number, agreement date, and outstanding amount
  • Contact details for making payment and for inquiries
  • Instructions for redirecting any dispute correspondence

For consumer financial products — credit cards, personal loans, mortgages — the Bank of Israel's supervisory circulars impose additional disclosure obligations on the selling institution. Banks are required to notify borrowers in advance of a portfolio sale where the operational relationship (account management, customer service) will transfer. Advance notice periods of 30 days are typical in these circulars, though the Banking Supervision Department's specific requirements depend on the product and the nature of the sale.

Notice sent to the debtor's last known address as it appears in the original creditor's records is treated as valid delivery, even if the debtor has moved and the letter arrives returned or unread. Foreign nationals who owe Israeli debt and have left the country without updating their address are particularly exposed to this rule. The assignment is fully effective against them from the date of delivery to the address on file, regardless of whether they personally received the letter.

In Practice — Bank Portfolio Sales and the Banking Supervisor
When an Israeli bank sells a loan portfolio — typically at 10–40% of face value depending on the asset class and delinquency level — the Bank of Israel's Banking Supervision Department requires the bank to follow its Proper Banking Management Directive (PBMD) on credit data transfer. The bank must report the transfer to the Sherut Nitunim Aleumi (National Credit Data Bureau) administered by the Bank of Israel under the Credit Data Service Law 5776-2016, updating the borrower's credit file to reflect the new creditor within 30 days of the sale closing. The selling bank also provides the buyer with the complete documentation package for each loan: the credit agreement, payment history, guarantees, collateral registrations, and any active Execution Office file references. A debtor who disputes the accuracy of the original credit data can still file a challenge with the Bank of Israel's credit bureau even after the loan has been sold.

4. Your Rights After Assignment: What Survives the Sale

Section 4 is the rule that matters most: the assignee takes the debt as it stands. Every right and defense you held against the original creditor carries over to the new one.

What survives the sale

  • If you were disputing the amount before the assignment, you can keep disputing it. The debt sale does not validate a contested balance.
  • Any payment you made to the original creditor before receiving the assignment notice discharges that portion of the debt, even once the file has moved to the new creditor. Keep records of every payment.
  • A payment schedule the original creditor agreed to binds the assignee. The new creditor cannot accelerate the entire balance to immediately due unless the original agreement specifically permitted that.
  • The limitation clock does not reset. Under the Prescription Law 5718-1958, most civil debts become unenforceable in Israeli court after seven years from the date they fell due. If two years had run before the assignment, the new creditor inherits five years remaining, not seven.
  • Any clause in the original agreement that capped the creditor's rights — interest rate limits, dispute resolution procedures, governing law clauses — applies equally to the assignee.

What the assignee cannot do

  • Charge interest above the rate in the original agreement, or impose new fees not permitted under that agreement
  • Accelerate a debt that was not past due under the original terms
  • Ignore an existing court judgment or Execution Office arrangement reached with the original creditor
  • Bypass a debtor's right to dispute the debt through the mechanisms available to them under Israeli law
  • Use collection tactics prohibited under Israeli consumer protection or harassment laws

Israeli courts have been consistent in holding that the assignee stands in the shoes of the original creditor — nothing more. A debt-buying company that attempts to inflate the balance by adding "assignment fees," "file transfer costs," or other charges not rooted in the original agreement will find those additions struck by an Execution Office registrar or a Magistrates Court on a debtor objection.

In Practice — Set-Off Rights After Assignment: A Worked Example
Say your Israeli bank owes you NIS 8,000 in overcharged account fees that you disputed in writing six months ago. The bank then assigns your NIS 40,000 loan balance to a debt buyer. You receive notification of the assignment. At the time of notification, your right to set off the NIS 8,000 counterclaim against the loan existed and predated the notice. Under Section 5 of the Assignment of Rights Law, you can assert that set-off against the new creditor, reducing the claimed balance from NIS 40,000 to NIS 32,000. To preserve this right, you should send the new creditor a written set-off notice (hodaat atzma'aut) within a reasonable time of receiving the assignment notice, stating the counterclaim clearly and attaching your evidence. Do not simply reduce your payment without notifying the new creditor in writing — that approach creates an underpayment dispute rather than a resolved set-off.
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5. What Happens to an Open Execution Office File?

When an Israeli creditor has already opened an enforcement file at the Execution and Collection Authority (Rashut HaHotzaa VeHaGviya, formerly the Execution Office) before selling the debt, the transfer of that file to the new creditor requires a formal procedural step that many debtors are not aware of.

The Execution Law 5727-1967 provides that the right to collect under a judgment or an enforcement instrument belongs to the creditor named in the file. When the creditor changes through assignment, the new creditor must apply to the Execution Office registrar to be substituted as the creditor of record (hahalafat tzad b'tik hotzaa). The application requires:

  • A copy of the assignment agreement between the original creditor and the assignee
  • Proof that notification was served on the debtor
  • The assignee's registered details for the file
  • A power of attorney in favor of the assignee's attorney if different from the original attorney

Until the substitution is formally granted by the registrar, the file continues to run in the original creditor's name. Practically, this means that during the gap between the private assignment and the official substitution, a debtor who makes payment directly to the original creditor is still discharging the debt — because the assignment has not yet taken effect against the Execution Office file.

Once substitution is granted, the new creditor controls all enforcement tools associated with the file: wage attachments, bank account freezes, property liens, and exit ban requests under Section 66 of the Execution Law. Any existing restrictions placed on the debtor under the original file — a stay-of-exit order, restricted license status, or a limited-means debtor designation — remain in force under the new creditor's file unless the new creditor withdraws them or the debtor successfully challenges them.

In Practice — Debtor Objection After Creditor Substitution
If the new creditor applies for substitution at the Execution Office and you dispute either the validity of the assignment or the amount claimed, you have 30 days from receiving notice of the substitution application to file a formal objection (hitnagdut) under Section 19 of the Execution Law. The objection is filed with the Execution Office registrar and, if it raises a legal question about the assignment rather than purely a factual dispute about the amount, the registrar will transfer the dispute to the Magistrates Court. Filing an objection does not automatically stay enforcement, but you can apply simultaneously for a temporary stay (atzira zmanit) pending the court's decision. The filing fee for an objection is approximately NIS 240, paid to the Execution Office cashier. An objection filed after 30 days requires the debtor to explain the delay; objections filed very late are frequently rejected on timeliness grounds without reaching the merits.

6. The Israeli Credit Bureau and Your Debt Record After Assignment

Israel operates a national credit data system under the Credit Data Service Law 5776-2016, administered by the Bank of Israel. Licensed credit providers — banks, credit card companies, regulated mortgage lenders, and similar institutions — must report debtors' credit information to the National Credit Data Bureau (sherut nitunim kalcali leumi) on a monthly basis.

When a debt is assigned from one licensed credit provider to another, both the outgoing and incoming creditor must update the bureau:

  • The original creditor reports the closure of the credit line or loan on their end and flags the reason as portfolio transfer
  • The new creditor (if a licensed credit provider) opens a new entry under their institution reflecting the same debt history — including the delinquency record that made the loan worth selling at a discount

The practical effect is that the delinquency remains visible on the debtor's credit file under the new creditor's name. The credit bureau record carries both a snapshot of the payment history under the original creditor and the ongoing status under the assignee. The entry does not reset to "current" simply because ownership changed. A debtor who had 18 months of missed payments before the assignment will see those payments reflected in the new entry.

Where the new creditor is not a licensed credit provider — for example, a private investment fund or a foreign debt buyer operating without a local license — the debt is not reported to the bureau in the same way. This means a debtor's official credit file may show the original debt as "transferred/closed" without a corresponding new entry. From the debtor's perspective, this can look better on paper than the reality: the debt is still owed and enforceable, but the credit bureau may not show it. This is a complication for debtors seeking new Israeli credit while an unlicensed assignee holds a significant claim.

In Practice — Requesting Your Credit Data File
Under the Credit Data Service Law, every individual whose data is held by the National Credit Data Bureau has the right to request a full copy of their file free of charge once per year. The request is made through the Bank of Israel's portal or by attending a licensed credit provider (a bank branch will process the request). The file shows: all outstanding credit facilities, payment history for the past five years, any insolvency notation, court judgments registered against you, and the identity of every creditor who has accessed your file in the past two years. If the file shows a debt that you believe has been incorrectly updated after assignment — for example, the original creditor shows the loan as "written off" rather than "transferred," creating an inaccurate default notation — you can file a data correction request with the Bank of Israel's credit data office. Corrections must be processed within 30 business days under the law.

7. Foreign Nationals and Assigned Israeli Debt

Address and notification

The assignment notice is legally effective when delivered to the address the original creditor holds on file. If you have moved abroad, changed your Israeli address, or stopped checking the PO box the bank was using, you may receive no actual notice even though the assignment is fully valid against you. For many foreign nationals, the first sign that anything happened is a letter from an unfamiliar debt buyer, an Execution Office enforcement notice, or a discovery that a lien has been registered against their Israeli property by someone they have never dealt with.

Check that your Israeli bank and any credit provider have your current overseas address. Updating correspondence details and email for official communications takes a branch visit or a secure-messaging session — worth doing before the problem arrives.

Enforcement against foreign debtors

A debt buyer who acquires an Israeli judgment debt against a foreign national holds the same enforcement rights as the original judgment creditor. If you have assets in Israel — bank accounts, real estate, shareholdings, rental income — those assets are reachable through the Execution and Collection Authority regardless of where you personally reside. The new creditor can apply for wage attachment orders if you have Israeli income, register property liens through the Land Registry (Tabu), and in cases involving Israeli assets of significant value, apply for a stay-of-exit order under Section 66 of the Execution Law that would prevent you from leaving Israel if you enter.

If you have no Israeli assets and do not enter Israel, a debt buyer holding an Israeli judgment must pursue you in your country of residence under that country's foreign judgment recognition rules — a more costly and uncertain process that many debt buyers do not pursue for smaller balances.

Negotiating with the new creditor

Debt buyers pay a fraction of face value for portfolios — typically 10 to 30 agorot per shekel for seasoned delinquent loans, depending on the asset class and how old the debt is. That low cost basis means they have room to settle well below the stated balance and still profit. Israeli debt buyers generally prefer early settlements over years of Execution Office proceedings.

If you want to settle, contact the new creditor's legal representative in writing with a lump-sum offer. Before paying anything, get a signed settlement agreement that confirms the payment discharges the full debt including accrued interest and costs, and that the new creditor will close any open Execution Office file and release any registered liens within 14 to 21 days of cleared funds. Do not pay first and rely on a verbal promise — you need the paper before the money moves.

In Practice — Limitation Period Check Before Responding
Before engaging with a new creditor who has contacted you about an assigned Israeli debt, check whether the debt is still within the limitation period. Under the Prescription Law 5718-1958, most contract debts are barred after seven years from the date of breach (typically the date of the first missed payment or the date of formal demand). Assignment does not restart the clock — the clock runs from the original breach date regardless of how many times the debt changed hands. If you receive a collection letter about a debt that fell due more than seven years ago, the limitation defense is likely available. However, certain actions can reset or toll the limitation period: a written acknowledgment of the debt by you, a partial payment made after the original due date, or an existing Execution Office file open before limitation expired. Consult an Israeli attorney before relying on a limitation defense, since specific facts matter considerably and the wrong response to a new creditor — such as offering to pay "part of" the balance — can inadvertently revive a time-barred debt.