Insolvency and financial rehabilitation proceedings in Israel - 2026

Insolvency

Nearly 15,000 Israelis filed for Insolvency and financial rehabilitation proceedings in 2025 - an increase of more than 8% compared to the previous year, according to data from the Commissioner of Insolvency and Economic Rehabilitation at the Ministry of Justice. Behind this stark figure are people from the community: self-employed people whose businesses collapsed, families whose ability to repay was eroded by the cost of living and the war, and Arabs who were required to repay a debt they did not create.

And yet, an old stigma still hangs around the procedure, bearing an old name - "bankruptcy." However, Israeli law has undergone a profound transformation in recent years, which is worth getting to know more closely.

From Punishment to Rehabilitation - The Essence of Change

The Insolvency and Financial Rehabilitation Law, which came into effect in September 2019, replaced the Mandatory Bankruptcy Ordinance. The main point of the change is not just in terminology: the law places the economic rehabilitation of the debtor as a central purpose, and establishes a structured path with a clear timetable and a predetermined end point - the discharge, with which the remaining debts are erased and the debtor returns to a normal economic life.

The logic is simple and appropriate: someone who falls into debt in good faith will pay what they are truly able to pay, within a set period - and the balance will be written off.

Two tracks, depending on the extent of the debts

As of 2026, the limit is 176,923 NIS.

Amount of debts - where the procedure is conducted

• Up to 176,923 NIS - Enforcement and Collection Authority (Execution)

• Over 176,923 NIS - The Commissioner for Insolvency Proceedings and the Magistrate's Court

The application is currently submitted online, and the order to open the proceedings is usually issued within one to two months. From the date of issuance of the order, the individual collection proceedings against the debtor - the foreclosures, the notices and the repeated appeals by the creditors - are stopped.

The course of the procedure: a year of examination, three years of an economic rehabilitation plan

After the opening order, an interim period of about a year begins, during which a trustee examines the debtor's financial situation: the circumstances of the formation of the debts, the assets, and the earning capacity. The debtor makes monthly payments according to his ability, and at the same time, restrictions apply to him - delay in leaving the country, status as a restricted client, and credit restrictions. This is not a comfortable period, but it is fixed and known in advance.

At the end of the examination, a report of the findings is submitted, and on its basis a financial rehabilitation order is issued - the heart of the procedure. The order establishes a repayment plan that matches the debtor's true ability, generally for a period of three years, at the end of which the discharge is granted. And in cases where the debtor has no ability to repay - due to age, illness or disability - the court is authorized to grant discharge immediately, without a payment plan at all.

Monthly payment rate: determined by ability, not by the amount of debt

This is the point that surprises many of those who contact me: the monthly payment is not derived from the amount of the debt but from the ability to repay. In January 2026, a new procedure of the Commissioner (Procedure 18.1) came into effect, which establishes "benchmarks" for a reasonable standard of living. Known living expenses are deducted from the total family income, and the remainder - the disposable income - is distributed, about half of it in favor of the creditors.

This means that a family whose income is below the basic subsistence level may only have to pay a symbolic fee, and still be able to retire on time; while a high earner will be required to make a substantial contribution to the retirement fund.

What the procedure does not erase - and who is it not suitable for?

Integrity requires us to say: A discharge does not erase everything. Alimony and fines debts, as a rule, are not erased in the process. And in April 2026, the court again clarified another rule: A debt created by intentional fraud is not dischargeable, and the creditor may continue to collect it even after the process has ended. The entire process is based on good faith; anyone who has smuggled assets or abused the process may find themselves without defense and without a discharge.

The process also has a price, and I don't want to embellish it: the limitations in the interim period, and the registration in the credit data system, which accompanies the debtor for years after its completion. However, compared to the alternative - accumulating interest, repeated foreclosures and endless persecution - for many debtors this is the safest way to return to a routine life.

End of the matter

In my work, I meet people who have lived for years in the shadow of debt, out of shame or out of the belief that "there is nothing to be done". It almost always turns out that there is, and that there is a lot. And here the proverb applies: "One hour earlier is better".

The earlier you contact and examine the situation, the better you can protect your assets, your family, and your peace of mind. Even those whose debts were incurred abroad, such as new immigrants who left behind obligations, should examine their case individually and professionally.

Maayan ABIHSSIRA, Attorney and Notary

The above is general information only, as of July 2026, and is not a substitute for individual legal advice. The amounts and figures are based on the law, the Commissioner's procedures, and publications in effect at the time of writing.