The procedure of bankruptcy
Many of us dream of starting a business. We want to achieve success at higher places in society, and some of us interpret “success” in the form of money. In other words, the more money we accrue, the more successful we are, and the more goals have been achieved. It’s understandable why many live their lives this way, for we live in a material world and we need money to do whatever we want. Unfortunately, the most common reason for accumulation of debts is not “unsuccessful businesses”, but poor financial management in difficult financial situations.
Adv. Daniel Yanovsky
So… How is it that many people get to the procedure of bankruptcy?
It is known that in most cases, the will to expand and make more money, has many risks to it, which explains why independent enterprises have the ability to earn more than people working as hired workers. However, even here, there comes a moment when this risk can have a different end result. The statistics don’t lie and show that in Israel, hundreds of thousands of citizens turn to bankruptcy every year, whether it’s because of problems in their business or because of poor management of their finances. It’s true that the fact that other people are in the same situation, doesn’t change reality, but as the saying goes: “Misery Loves Company”.
What to do and what is the goal of the procedure of bankruptcy?
First of all, you have to understand that beginning the procedure of bankruptcy is not the worst thing that can happen to you. You can find yourselves in much worse situations than financial problems. Therefore, there is no reason to worry because there are ways to overcome this situation, and the Israeli law intends to protect you and help you. Secondly, it’s important to understand the purpose of the procedure of bankruptcy. People who have never had financial difficulties and are not familiar with the fear of checking the bank account every morning, cannot understand how unpleasant it can be to live in such a state. Nevertheless, people such as you, who go through this situation for some time and avoid phone calls for months, know that living this way for a long time is impossible and something needs to be done.
It’s important to understand that the process of bankruptcy has some goals. The first one is to give the debtor the ability to start his life anew from a financial point of view. Even the authorities understand that each one of us can make mistakes, get lost in life and make the wrong decisions; and that’s why each one of us has the opportunity to start anew and bankruptcy can help with that. Another goal of such procedure is to give you an incentive for future business investments despite the temporary failure you are experiencing right now. In other words, just because you did not achieve success today, doesn’t necessarily give an indication about the future. Besides this, the process of bankruptcy provides an effective arrangement and distribution among your creditors.
Why, in many cases, is the procedure of bankruptcy preferred over an arrangement at the execution office?
If you come from the business world and are interested in the economy, you’ve probably heard of agreements in the service of execution. In other words, when you have debts, whether it is in your business or on a personal level, there is an attempt to turn to the execution office and reach some sorts of agreement. Nevertheless, there are cases where bankruptcy is the right choice and there are some good reasons for that. First and foremost, from the moment you begin the procedure of bankruptcy, all of your debts are frozen, and this means that the creditors can’t act in any way against you. The advantage here is that you get a chance for a breather. This is a great advantage, for being in this stage; people can get out of the troubling financial situation they got into and this way, they prevent the continuation of the procedures against them. Besides that, there are some more advantages to such procedure unlike arrangements at the execution office, for example: Opening a bank account and using it for receiving your salary and there is a minimal monthly payment of a few hundred shekels each month.
Such situation allows you to live with dignity in this intermediary period while not having to pay the whole sum every month. If that’s not enough, you should know about the next advantage is that all interest fees and fines for your debts are cancelled. It’s especially important when it’s about big debts and it should be taken into account.
How much time will the procedure of bankruptcy take?
Every person who decides to choose the option of bankruptcy wants to reach the end of the procedure as quickly as possible and start from the beginning. The good news is that in the past, such procedures took months and even years, however more recently it doesn’t take the same length of time. The goal of the authorities is to help the debtor return to his normal life as quickly as possible, which is expressed in the shortened process unlike in the past. In fact, a debtor can get rid of his debts in 18 months! That’s why, although this is not a pleasant period and although the situation you are in will not disappear in one day, at least, there is a future. That’s why we don’t recommend postponing the matter and don’t bury your head in the sand, but send an application as quickly as possible and start the procedure of bankruptcy.
How does the procedure of bankruptcy end?
The process of bankruptcy ends when the debtor receives exemption. Such an exemption means fully releasing the debtor from all of his debts and allowing him to start his life anew. The things that will determine whether the debtors gets an exemption or not, are, of course, the circumstances, the situation, all of the documents that were submitted in court and the trustee’s opinion. External management and thinking outside the box, can affect the result of getting the exemption and that’s why it’s safe to say that the process is not complete until the debtor receives the exemption. Besides this it’s good to know that there are some kinds of exemptions which the debtor can get after the procedure of bankruptcy. The first one is the full exemption which is the best result for the debtor. This exemption guarantees a full release from the current debts – full erasure of debts!
Nevertheless, there is a full exemption which the judge gives power to, immediately. Another kind of exemption which the debtor can get after the procedure of bankruptcy is a partial exemption which exempts the debtor only from a part of his debts. The one who decides from which debts the debtor will be released and from which not, is the judge and his decision depends on various criteria. The last kind is conditional exemption. In this case, the court will say that the debtor will definitely get an exemption only if he follows certain conditions set by the court.
Why would you need a lawyer to deal with this procedure?
If there’s anything which characterizes our time, that would be the fact that, today, you can read tons of information about any subject on the internet. Therefore, just as you can read information about flying abroad and cruising, so you can read information on the internet about the procedure of bankruptcy. Yet, there is great difference between theoretical studies by reading articles, and practical experience. Therefore, if you are dealing with this kind of situation and would like to get the desired exemption from debts in a short time and at a minimal cost, you should turn to leading professionals who can help you. A bankruptcy lawyer is the right professional for you because such a professional studied the field, is familiar with the law and all of the procedures and can represent you in court in the best possible way, so what are you waiting for?
If you have debts or files at the execution office, they are usually followed by an order of prohibition from leaving the country, bank account foreclosure, seizure of salary, and sometimes even limitation of the driver’s license.
We invite you to become familiar with the additional information about such matters in the other articles on our website and get the information which will help you get through this unpleasant period in life with minimal damage and in short time. We hope that it will help you, and if you have any questions about the process of debt erasure and execution, send us a message or call us – we will be glad to assist you.
* The given above article is by no means, juridical consultation and only reflects some aspects about the process of bankruptcy in Israel.