Quick Answer: When an Israeli individual files for personal insolvency under the Insolvency and Economic Rehabilitation Law 5778-2018, the District Court issues an insolvency order that immediately freezes all Execution Office enforcement against that debtor. Foreign creditors have 90 days from the order date to file a proof of debt (tavinat chov) with the Official Receiver (HaKoneset HaRasmit). A rehabilitation plan lasting 18 to 36 months is then set, during which the debtor makes monthly payments to all admitted creditors on a pro-rata basis. Unsecured foreign creditors typically recover 10 to 40 percent of their admitted claim. Missing the proof-of-debt deadline puts your claim behind all timely creditors.

You are owed money by an Israeli individual. You may hold a court judgment, an unpaid invoice, or a personal guarantee. The Execution Office enforcement file is open, and then your attorney calls: the debtor has filed for personal insolvency. Your bank attachments and wage garnishments are suspended. What happens now?

Israel replaced its century-old Bankruptcy Ordinance with the Insolvency and Economic Rehabilitation Law 5778-2018, which came into force on September 15, 2019. The new law shifted the focus from liquidating assets to rehabilitating debtors. If you are a creditor, that shift has real consequences for how you collect, what you file, and how much you see at the end. This guide explains the process from start to finish.

1. The 2019 Law: What Changed From the Old Bankruptcy Regime

Israel's former Bankruptcy Ordinance 1980 (which traced to a British Mandate-era statute) treated personal insolvency as primarily a creditor remedy: a bankrupt's assets were liquidated and distributed, and the bankrupt individual carried the stigma of discharge for years. The 2018 law reversed the priority.

Under the new framework, Section 2 of the law sets the primary objective as maximizing creditor recovery, but within a structure that prioritizes rehabilitating the debtor and returning them to productive economic life. The practical changes for creditors:

  • The proceeding is no longer called "bankruptcy." It is an "insolvency proceeding" (halichei chadalut), divided into a rehabilitation track and, only where rehabilitation is not feasible, a liquidation track.
  • The Official Receiver (HaKoneset HaRasmit) is now the central officer screening all petitions and making initial recommendations to the District Court. Under the old law, creditors' committees drove more of that process.
  • An insolvency order triggers an automatic stay under Section 125 on all individual creditor enforcement. The Execution Office file is suspended, not just transferred.
  • Discharge is the statutory end goal: a debtor who completes the rehabilitation plan receives a full discharge (ptor) of all provable debts, with no public record beyond the gazette notice. The old system left discharged bankrupts on a register for years.
  • Creditors who file inflated claims or collude with the debtor can be penalized by the court under Section 280 of the law, which has no equivalent in the old Ordinance.
In Practice — Timeline Under the 2018 Law vs. the Old Ordinance: Under the old Bankruptcy Ordinance, a creditor who obtained a receivership order against an Israeli individual could expect the process to take 5 to 10 years, with most of that time spent on liquidating whatever property existed and litigating competing creditor claims. Under the Insolvency and Economic Rehabilitation Law 5778-2018, the Official Receiver must submit its initial report to the District Court within 60 days of the insolvency order (Section 187), the court must approve or vary a rehabilitation plan within 9 months (Section 206), and the plan period itself is capped in most cases at 36 months (Section 207). A debtor with steady income can go from filing to discharge in under 3 years. For creditors, this means faster — though often smaller — distributions.

2. How a Personal Insolvency Proceeding Begins

A personal insolvency proceeding under the 2018 law can be initiated in one of two ways: by the debtor themselves, or by a creditor owed at least NIS 50,000.

Debtor-initiated proceedings (the common case)

Most insolvency proceedings in Israel are filed by the debtor. The debtor files a petition (bakasha lehachrazat chadalut) with the Official Receiver's office under Section 167 of the law, attaching a complete financial disclosure: all assets and their values, all debts and creditors, monthly income and expenses, a list of all Execution Office files, and an explanation of how the debtor became insolvent. The filing fee is approximately NIS 988. The Official Receiver reviews the petition within 30 days and submits a report to the District Court recommending whether to grant an insolvency order.

What the Official Receiver investigates

The Official Receiver's report addresses whether the debtor is genuinely insolvent (unable to pay debts as they fall due), whether the debtor has been honest in the financial disclosure, whether any assets have been transferred to relatives or associated parties in the five years before the petition in a manner that could constitute a fraudulent preference under Sections 221-222 of the law, and whether the debtor qualifies for the fast-track process (maslul metukar) for individuals whose total debts do not exceed NIS 150,000.

The insolvency order

If the District Court grants the petition, it issues an insolvency order (tzav chadalut) under Section 172 of the law. The order is published in the official gazette (Reshumot) and on the court's public website. Creditors are notified by the Official Receiver through the gazette publication and, where contact details appear in Execution Office records, directly. The order date is the critical reference date for all subsequent deadlines.

In Practice — Debtor Hides Assets During the Petition Process: An Israeli individual owed NIS 870,000 to a German machinery supplier under a personal guarantee on a corporate debt. Six months before filing for insolvency, the individual transferred his Tel Aviv apartment to his adult daughter for NIS 50,000 — far below the NIS 3.2 million market value. The Official Receiver's report flagged the transfer as a fraudulent preference under Section 221 of the Insolvency and Economic Rehabilitation Law 5778-2018: the transfer occurred within 5 years of the petition, the consideration was grossly inadequate, and the debtor was already insolvent at the time of transfer. The District Court issued a voidance order under Section 222 setting aside the transfer. The apartment was returned to the estate. After sale, the German supplier — holding the largest single admitted claim — received approximately NIS 320,000, representing 37% of its NIS 870,000 claim. Without the voidance action, unsecured creditors would have received nothing.

3. The Automatic Stay: What Happens to Your Enforcement Actions

The moment the District Court issues an insolvency order, Section 125 of the Insolvency and Economic Rehabilitation Law 5778-2018 imposes an automatic stay (atzira automatit) on virtually all creditor enforcement against the debtor personally.

From the order date, the stay suspends:

  • All Execution Office proceedings: bank account attachments, wage garnishment orders, salary attachment orders, and stay-of-exit orders all halt immediately
  • Pending Magistrate Court or District Court civil proceedings against the debtor (they can continue only with court permission)
  • Any new individual creditor enforcement outside the insolvency framework
  • Set-off rights that arose after the insolvency order, in most circumstances

What the stay does not cover:

  • Criminal proceedings and criminal fines, which continue independently
  • Family law enforcement (child support, alimony) under a judgment predating the insolvency, which continues through the Family Court and NII enforcement channels
  • Enforcement against assets in which the debtor holds only a beneficial interest but which belong to a third party (assets held in trust for someone else)
  • Secured creditor enforcement against specific collateral, though even this requires Official Receiver notification and in some cases court approval under Section 127
In Practice — Execution Office File Suspended Mid-Collection, Section 125 Insolvency Law: A US-based technology company held a NIS 420,000 Magistrate Court judgment against an Israeli distribution partner. The Tel Aviv Execution Office had already frozen NIS 95,000 across two bank accounts and was 30 days into a wage garnishment order against the individual's employer when the insolvency order was issued. Under Section 125, the Execution Office notified the company that all proceedings were suspended. Crucially, the NIS 95,000 already frozen — but not yet transferred to the Execution Office's payment account — was released back to the debtor's bank accounts as part of the automatic stay. The company's Israeli attorney immediately filed a creditor's claim in the insolvency proceeding for the full NIS 420,000. Had the NIS 95,000 been transferred to the Execution Office payment account before the order, the question of whether it could be retained as a payment received in the 90 days before the petition (potentially subject to preference clawback under Section 221) would have required careful legal analysis.

4. Filing Your Creditor Claim: The 90-Day Deadline

Once an insolvency order is issued, all creditors must submit a formal proof of debt — called a tavinat chov (creditor's claim form) — to participate in any distribution. This is not optional: even a judgment creditor who considers their debt undisputed must file the claim form within the period specified in the insolvency order, which is typically 90 days from the date the order is published in the Reshumot gazette.

What the claim form must contain

  • Full creditor identity details: name, registration number (for companies), Israeli attorney contact details
  • The amount claimed, broken down into principal, interest accrued up to the insolvency order date, and costs
  • The legal basis for the claim: contract, court judgment, guarantee, or other instrument
  • Whether the debt is secured (and the nature and value of the security) or unsecured
  • All supporting documents: the original contract, unpaid invoices, court judgment, bank records confirming payments made or not made
  • A declaration by the creditor or its representative that the debt is genuine and outstanding

What happens to late claims

Section 218 of the law allows late claims to be admitted, but at the Official Receiver's discretion and only after all timely admitted claims have been paid in full. In practice, where there are insufficient assets to pay timely creditors in full — which is the overwhelming majority of cases — late claims receive nothing. There is no fee to file a creditor claim, but preparation by an Israeli attorney typically costs NIS 3,000 to NIS 8,000 depending on the complexity of the supporting documentation.

In Practice — Foreign Creditor Proof of Debt, Section 218 Insolvency Law: A Dutch company was owed NIS 340,000 under a supply agreement with an Israeli sole trader who later filed for personal insolvency. The insolvency order was published in Reshumot on March 5, 2026, giving creditors until June 3, 2026 to file claims. The Dutch company's home-country advisors saw the gazette notice only in late May 2026 — six weeks after publication — and immediately retained an Israeli attorney. The attorney filed a complete tavinat chov on June 1, 2026 — two days before the deadline — attaching the signed supply agreement, all 14 unpaid invoices, emails from the debtor acknowledging the outstanding balance, and a Bank of Israel exchange rate certificate converting the EUR 82,000 debt to NIS 340,000 as of March 5, 2026. The claim was admitted in full. Three other foreign creditors, none of whom had received direct notice or retained Israeli counsel, missed the June 3 deadline. Their late claims, filed in August, were admitted to the register but will receive distributions only after the Dutch company and all other timely creditors are paid in full — which the Official Receiver's report projected would not occur given the estate's limited assets.

5. The Rehabilitation Plan: How Distributions Work

After creditor claims are filed and reviewed, the Official Receiver prepares a rehabilitation plan (tochnit shikum) under Section 197 of the law, which is submitted to the District Court for approval within 9 months of the insolvency order.

What the rehabilitation plan contains

The rehabilitation plan sets out: the debtor's assessed monthly disposable income (income minus a statutory minimum for living expenses, currently approximately NIS 5,500 per month for a single person, NIS 8,000 for a couple, plus NIS 1,500 per dependent child under Section 195); the monthly payment amount; the plan duration (typically 18 to 36 months, with extensions possible in cases of bad-faith debt accumulation under Section 207); and the projected total payout to creditors.

Priority of payment

Creditors receive distributions in the following statutory order:

  1. Insolvency administration expenses — the Official Receiver's fees and the costs of running the proceeding (these come off the top before any creditor sees a shekel)
  2. Priority creditors under Section 243 — employee wage claims up to 3 months' salary, pension fund contributions, and National Insurance Institute (NII) contributions owed by the debtor as an employer
  3. Secured creditors — from the proceeds of their specific collateral (see Section 6 below)
  4. Preferential tax debts — Israel Tax Authority claims for the two years preceding the insolvency order, under Section 243
  5. Ordinary unsecured creditors — all remaining admitted claims on a pro-rata basis
  6. Late admitted claims — only if anything remains after ordinary creditors are paid in full

Foreign commercial creditors almost always fall into Category 5 — ordinary unsecured creditors. They share pro-rata in whatever remains after Categories 1 through 4 are fully satisfied. In a typical Israeli personal insolvency, Categories 1, 2, and 4 absorb a significant portion of whatever monthly payments the debtor makes over 18 to 36 months, leaving Category 5 creditors with 10 to 40 percent recovery on admitted claims.

Objecting to the plan

Creditors have 30 days after the plan is published on the court's website to file objections. Grounds for objection include: the debtor has concealed assets or income; the monthly payment was set too low based on falsified expense declarations; the plan period is shorter than it should be; or specific claims were incorrectly valued or excluded. Objections are filed directly with the District Court assigned to the proceeding and are decided at a hearing.

In Practice — Creditor Challenges Rehabilitation Plan, Section 197 Insolvency Law: A British commercial landlord was owed NIS 620,000 in unpaid rent by an Israeli individual who had personally guaranteed his company's lease. The debtor filed for insolvency. The Official Receiver's rehabilitation plan set the debtor's monthly payment at NIS 2,800, based on declared income of NIS 12,000 per month. The British landlord's Israeli attorney noticed that the debtor's LinkedIn profile showed a newly listed freelance consulting role at a Tel Aviv firm, and the debtor's Instagram account posted photos from a recent trip to Miami. The attorney filed a creditor objection under Section 200(b), attaching a printout of the LinkedIn profile and requesting the court order the debtor to produce three months of bank statements. At the hearing, the District Court judge ordered bank statement disclosure. The statements showed average monthly income of NIS 19,500 — NIS 7,500 more than declared. The court recalculated the monthly payment at NIS 4,900 and extended the plan from 24 months to 36 months. The British landlord's projected recovery increased from approximately NIS 48,000 to NIS 105,000 on its NIS 620,000 claim — a meaningful difference, though still only 17% recovery.

6. Secured Creditors: A Different Track

If you hold a registered lien (mashkanta or shiabud) over Israeli real property, or a pledge (mashkon) over specific personal property, the insolvency proceeding affects you differently from unsecured creditors.

A secured creditor's rights attach to the specific collateral, not to the debtor's estate generally. Under Section 127 of the Insolvency and Economic Rehabilitation Law 5778-2018:

  • The automatic stay applies to the secured creditor's enforcement against the collateral for the first 90 days from the insolvency order. During this period, the secured creditor must file its claim in the insolvency proceeding and is entitled to apply to the court for permission to enforce against the collateral if the automatic stay is causing unjustified prejudice.
  • After 90 days, the secured creditor may proceed to enforce against the collateral through the Execution Office regardless of the insolvency proceeding, unless the court extends the stay on the Official Receiver's application.
  • The secured creditor participates in the general distribution only to the extent its claim exceeds the value realized from the collateral — the shortfall amount ranks as an unsecured claim in Category 5.
In Practice — Mortgage Lender Enforcing After 90-Day Stay, Section 127 Insolvency Law: An Israeli bank held a NIS 1,200,000 mortgage over a Tel Aviv apartment owned by an insolvent individual. The debtor's total unsecured debts were NIS 890,000 across 14 creditors. On day 91 after the insolvency order, the bank filed with the Tel Aviv Execution Office to proceed with the mortgage enforcement. The apartment was sold at auction for NIS 2,150,000. After deducting the Execution Office's enforcement commission (approximately 3.5%), sale expenses, and property taxes in arrears, the bank received NIS 1,179,000 against its NIS 1,200,000 mortgage balance — recovering 98% of its secured claim. The bank filed the NIS 21,000 shortfall as an unsecured claim in Category 5. The surplus of NIS 950,000 (after paying the bank, sale costs, and priority creditors) was transferred to the Official Receiver and distributed pro-rata among the 14 unsecured creditors. Each received approximately 72% of their admitted claim — an unusually high recovery driven by the property surplus.

7. How Creditors Can Force an Israeli Debtor Into Insolvency

When a debtor refuses to pay but also refuses to file voluntarily, a creditor owed at least NIS 50,000 can file a creditor insolvency petition (bakasha noshet le-hachrazat chadalut) under Section 202 of the Insolvency and Economic Rehabilitation Law 5778-2018.

Requirements for a creditor petition

  • The debt must be at least NIS 50,000 and must be a matured, undisputed obligation — or a judgment debt
  • The debtor must have been given reasonable opportunity to pay and have failed to do so
  • The creditor must demonstrate the debtor is insolvent — typically by showing the debtor has unsatisfied judgment debts, multiple Execution Office files, or other evidence of inability to pay
  • The petition is filed at the District Court and served on the debtor through a court-authorized process server

Strategic considerations

Filing a creditor insolvency petition is most effective when the debtor has Israeli real property (providing assets for the estate to distribute), has been hiding income or assets from the Execution Office (which the insolvency investigation may uncover), or owes debts to multiple creditors who can coordinate. The petition itself costs approximately NIS 988 to file plus attorney fees; Israeli attorneys charge NIS 8,000 to NIS 25,000 for a creditor petition depending on complexity. However, if the debtor has no Israeli assets and no Israeli income — living abroad or having transferred all assets — a creditor petition may produce an insolvency order but result in no meaningful distribution.

In Practice — Creditor Petition Forces Insolvency and Asset Investigation, Section 202 Insolvency Law: A French company was owed NIS 540,000 by an Israeli individual who had personally guaranteed a commercial lease and then simply stopped responding. The Execution Office file showed no bank accounts, no registered vehicles, and no real property — the individual appeared to have no attachable assets. The French company's Israeli attorney suspected asset concealment and filed a creditor insolvency petition at the Tel Aviv District Court. At the insolvency order hearing, the debtor appeared — his first communication in 18 months — and the court ordered the Official Receiver to investigate all asset transfers in the preceding 5 years. The investigation uncovered that the individual had transferred his Tel Aviv apartment to his mother 3 years earlier for NIS 1 — a sum grossly below the NIS 2.8 million market value. The court voided the transfer under Section 222. The apartment was returned to the estate, sold at auction, and the French company — as the petitioning creditor and the largest single creditor — received NIS 412,000, representing 76% of its admitted claim after administration costs and priority creditors were paid first.

8. What Foreign Creditors Must Do Immediately After an Insolvency Order

For a foreign creditor with no Israeli presence, the process is workable — but the 90-day window moves fast and the notices are in Hebrew.

Step 1: Retain Israeli insolvency counsel immediately

Gazette notices are published in Hebrew. If you are not monitoring Israeli insolvency publications — which is the norm for foreign creditors — you may learn of an insolvency order only through an Execution Office notification, a returned bank attachment notice, or contact from the debtor. From the moment you learn of an order, retain an Israeli attorney experienced in insolvency proceedings. The 90-day proof-of-debt deadline runs from the date of the gazette publication, not from the date you personally learned of the order.

Step 2: Gather and translate all supporting documents

The creditor claim form requires full documentation of the debt. For foreign creditors, this typically means: translating key contractual documents into Hebrew (certified translation costs NIS 200 to NIS 450 per page), obtaining a Bank of Israel exchange rate certificate for the conversion date (the insolvency order date), and having the claim form attested by an Israeli attorney or notarized by an Israeli consulate if you are filing from abroad.

Step 3: Monitor the Official Receiver's reports

The Official Receiver publishes reports on the court's website as the proceeding progresses. These are in Hebrew and indicate the total admitted claims, the debtor's assessed income, the proposed monthly payment, and the projected pro-rata distribution. Your Israeli attorney can monitor these and advise whether to file an objection, attend hearings, or coordinate with other major creditors.

Step 4: Consider joining a creditor committee

Under Section 235 of the law, creditors who collectively hold at least 10% of total admitted claims can apply to the District Court to establish a creditors' committee with standing to receive information from and make submissions to the Official Receiver. For large foreign creditors, particularly where the debtor's declarations appear suspicious, participating in a creditors' committee provides significantly more visibility and influence than passive monitoring.

Stage Timeline Creditor Action Required
Insolvency order issued Day 0 Retain Israeli counsel; stop all separate enforcement
Proof-of-debt deadline 90 days from order date File tavinat chov with all supporting documents
Official Receiver report Within 60 days of order Review report; assess whether to object to asset valuations
Rehabilitation plan published Within 9 months of order Review plan; file objection within 30 days if income or assets understated
Plan approval & distributions start Months 9–12 Confirm Israeli bank account details with Official Receiver for payment
Discharge 18–36 months after plan approval Remaining unpaid balance is discharged; no further recovery is possible
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Frequently Asked Questions

Yes. Section 218 of the Insolvency and Economic Rehabilitation Law 5778-2018 treats foreign creditors identically to Israeli creditors. The Official Receiver publishes the creditor notice in the Israeli gazette and on the court's website. Foreign creditors must file their claim form within 90 days of the insolvency order or within the period in the notice. Missing the deadline does not extinguish the debt but puts you at the back of the queue — late claims are paid only after timely claims are settled in full, which in most cases means nothing.
The automatic stay under Section 125 of the Insolvency and Economic Rehabilitation Law 5778-2018 takes effect immediately on the insolvency order. Bank attachments, wage garnishments, property liens, and stay-of-exit orders all halt. Creditors cannot collect individually during the proceeding. Secured creditors may enforce against their specific collateral after 90 days unless the court extends the stay. Child support and alimony enforcement continues through separate channels.
A standard rehabilitation proceeding takes 18 to 36 months from the insolvency order to discharge. Unsecured creditors typically recover 10 to 40 percent of their admitted claims, depending on the debtor's income, assets, and the number of creditors. Where the debtor has no income and no assets, the court can grant a discharge without any payment plan, resulting in zero recovery for unsecured creditors. Secured creditors recover from the value of their specific collateral and rank as unsecured for any shortfall.
Yes. Section 202 of the Insolvency and Economic Rehabilitation Law 5778-2018 permits any creditor owed at least NIS 50,000 to file a creditor insolvency petition against an Israeli individual. The creditor must hold a matured, undisputed debt — typically an Israeli court judgment. Filing costs approximately NIS 988 plus attorney fees (NIS 8,000–NIS 25,000). A creditor petition is most effective when the debtor has Israeli assets that the Official Receiver can investigate and potentially claw back from fraudulent transfers.
Yes, subject to two conditions. The debt must be a valid civil obligation — a contract, loan, judgment, or guarantee. Foreign tax debts and foreign social security obligations are not enforceable. The claim must be converted to NIS at the Bank of Israel exchange rate on the date the insolvency order was made. Interest accruing after the insolvency order date stops running for unsecured creditors. Once admitted, the claim participates in distributions on the same terms as Israeli creditors.

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Adv. Eli Shimony

Licensed Israeli Attorney

Adv. Eli Shimony advises foreign companies and individuals on creditor rights in Israeli insolvency proceedings, from filing proof-of-debt claims through challenging rehabilitation plans and petitioning for insolvency against Israeli debtors.

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