Debt Collection in Israel

The debt collection process in Israel begins with an assessment of the debtor’s solvency, their line of business, the history of the business, the availability of documentary evidence of the debt, current court cases and enforcement proceedings, and the possibility of disputing the debt. This assessment determines the strategy that will be used on behalf of the client in the collection process.

If the debtor has no current court cases or outstanding judgments on debt collection, and is actively engaged in commercial activities, then it is advisable to use the out-of-court debt collection stage.

This stage involves active negotiations with the debtor in order to reach an agreement on payment of the creditor’s claims or other possible settlement options (e.g. return of goods, transfer of the debt to a third party, exchange of services or goods).

Interaction with the debtor begins immediately after sending a notice by mail, email, phone or instant messengers. This process involves intensive communication with the debtor in order to exert constant pressure. The main objective is to establish contact with key decision makers to achieve the fastest possible debt recovery.

The average time for informal extra-judicial collection is up to 60 days (except in cases where a debt repayment installment plan is agreed upon). If this stage does not bring the expected results or after the initial analysis it becomes clear that it is not applicable, it is necessary to proceed to collection through the court.

Before initiating judicial collection, it is worth paying attention to the limitation period. The limitation period for debt collection is 7 years. The parties have the right to agree in a separate written agreement on a longer or shorter limitation period (but not less than 6 months). The consequences of missing the limitation period are applied by the court only at the request of the defendant, if the defendant declares this immediately after receiving the claim. If the defendant acknowledges the debt, either in writing or in court, either during or after the statute of limitations expires, the statute of limitations is interrupted and a new countdown begins on the day of the acknowledgment.

Israeli law provides for judicial collection of debts in ordinary and simplified judicial proceedings.

Ordinary judicial proceedings begin with the filing of a statement of claim to which the defendant must file a response within sixty days from the date of service of the statement of claim. The court may extend the period if it considers that there are grounds for doing so.

Within thirty days from the date of service of the last procedural document, the parties have to hold a preliminary discussion. The purpose of the preliminary discussion is to ensure that the parties are well prepared for the hearing, to clarify the issues in dispute through mutual disclosure and full transparency so that the parties can properly prepare for the hearing, and to consider the possibility of settling the dispute through an alternative dispute resolution mechanism.

During the preliminary discussion, the parties shall provide access to the necessary documents and answer questions that are important for clarifying the disputed issues and narrowing the differences between them, acting with maximum transparency. Upon completion of the preliminary discussion and no later than twenty days before the date of the first preliminary hearing, the parties shall file a report on the preliminary discussion conducted and attach to it the necessary documents presented during the preliminary discussion; in the absence of agreement on a joint report, each party shall file the said form in its own name. If a party fails to comply with these requirements in whole or in part without good cause, the court shall impose on it the costs in favor of the opposing party or the state.

After receiving the response to the claim or after the time limit for filing the response to the claim has expired, the court will schedule a preparatory hearing. As a rule, a preparatory hearing should not exceed two hearings in a magistrate’s court and three hearings in a district court. At the preparatory hearing, the court will establish the order of the case, including dates for hearing evidence and presenting arguments, determine the duration of testimony, the time limits for questioning, and the duration of each party’s speeches.

Following the final preparatory hearing, the case will be heard within the time frame determined by the court, during which the parties will present their arguments and evidence. If the defendant fails to appear at the hearing, the plaintiff may prove his claims and obtain a judgment based on the evidence presented. Upon completion of the hearing, the court will render a decision as soon as possible, taking into account, among other things, the volume of written and oral evidence and the complexity of the case. The trial court must render a decision no later than ninety days after the completion of the hearing.

A simplified trial is used for cases in which the amount of the debt does not exceed NIS 75,000. The case must be heard within a shorter time frame: 1) The response to the claim is filed within forty-five days from the date of service of the claim on the defendant; 2) The date of the preliminary hearing must not exceed ninety days from the date of filing the last response to the claim, and only one preliminary hearing will be held; 3) A date for the hearing must be set within six months from the date of filing the response to the claim; 4) The hearing of the claim must be completed within one day; 5) The decision on the case must be rendered within 14 days after the completion of the hearing.

The decision of the Magistrates’ Court may be appealed to the District Court, and the decision of the District Court may be appealed to the Supreme Court of Israel. The appeal period is 60 days from the date of the decision. Filing an appeal does not suspend the execution of the decision being appealed. However, the court may order a stay of execution of the decision it has rendered under the conditions it deems appropriate.

After the judgment has entered into legal force, the creditor must initiate enforcement proceedings. The judgment may be presented for enforcement for 25 years. Within the framework of the enforcement of the judgment, the creditor’s claims may be satisfied by seizing and writing off funds from the debtor’s accounts; seizing the movable and immovable property of the debtor and then selling them; seizing and confiscating securities; seizure and confiscation of company shares.

If the debtor shows signs of insolvency, then the bankruptcy procedure should be considered. According to the Israeli Insolvency and Economic Rehabilitation Law, insolvency is a financial situation in which the debtor is unable to pay his debts on time, regardless of whether they are due or not, or a situation in which the debtor’s obligations exceed the value of his assets. The creditor has the right to initiate this procedure, provided that the amount of the debt exceeds NIS 83,313.65 and the debtor has not paid the debt within 30 days of receiving the corresponding demand from the creditor. At this stage, if the debtor’s assets are insufficient to fully satisfy the creditors’ claims, it is possible to cancel the debtor’s transactions made with the intent to harm the creditors. Among such transactions, the following should be highlighted: 1) a transaction concluded within two years prior to the opening of bankruptcy proceedings with the purpose of transferring the debtor’s assets without proper compensation from the debtor’s counterparty (provided that the debtor was in a state of insolvency at the time of the transaction or became insolvent as a result of such a transaction); 2) transactions aimed at concealing the debtor’s property concluded within seven years prior to the opening of bankruptcy proceedings; 3) transactions aimed at providing an advantage to one creditor over others concluded within three months prior to the opening of bankruptcy proceedings. As a result of the cancellation of the above transactions, it is possible to return back to the debtor what he lost from such transactions and thereby increase the liquidation estate to satisfy the claims of creditors and cover the costs of implementing the bankruptcy procedure.

If you have any questions or need support on international debt collection in Israel, our company is ready to provide its expert assistance for an effective resolution of your financial issue. Contact us to get additional information and professional support from specialists of the leading debt collection agency.

# DEBT COLLECTION AGENCY ISRAEL

29.10.2024

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