A 41% increase in the number of bankruptcy applications filed from the beginning of 2020

A 41% increase in the number of bankruptcy applications filed from the beginning of 2020 to mid-November compared to the same period in 2019. This is according to a report by the Commissioner of Insolvency Proceedings in the Ministry of Justice, the state-responsible body for managing and supervising individual bankruptcy proceedings. Dissolution and recovery of companies and creditors' arrangements.
Data reflecting an increase in bankruptcy filings indicate that following the Corona crisis, many businesses and individuals find themselves in financial turmoil and having difficulty staying afloat, unable to repay their debts and becoming insolvent. Adv. Sigal Yaakovi, the official receiver (as above) and the person in charge of insolvency proceedings, foresaw the future to come months ago. "It will be impossible to avoid experiencing an increase in the volume of insolvency applications and probably also in very, very large volumes of tens of percent," Yaakovi said.
The data show that the corona plague, which began in March 2020, has an effect on the number of insolvency proceedings in Israel. From the beginning of the year until November 15, 18,990 applications were submitted for the opening of insolvency proceedings (bankruptcy) by individuals. Of these, 4,283 with debts of less than NIS 150,000 were transferred to the Enforcement and Collection Authority. A comparison with the corresponding period last year shows that by mid-November 2019, 13,441 applications had been submitted, meaning that this year there was a 41% increase in bankruptcy applications. It is to be expected that in the next month and a half until the end of the year, the number of bankruptcies will even cross the 20,000 mark.
The report also shows that in June 2019, 1,165 insolvency applications were filed compared to 2,038 in June 2020, an increase of 75%. In March 2020, at the beginning of the first wave, 1,919 insolvency applications were filed compared to only 1,086 in March 2019, a jump of 77%.
Bankruptcy is a complex procedure. Its main advantage is the ability to open a financially clean page, get rid of debts and start over. But it should be borne in mind that there are debts that cannot be dismissed such as alimony, fines, fraudulent debts and more. In addition, the procedure has a restriction on the ability of future economic activity because the information reaches the financial system, appears in credit data reports and limits the ability to take new credit. There are also restrictions during the procedure of delaying departure from the country, need to submit monthly expenses and income. Financial check with the incumbent and more.
The Insolvency and Economic Rehabilitation Law came into force on September 15, 2019, and in effect replaces the bankruptcy ordinance that was in place until then. The concept underlying the new law is to take care of the debtor's rehabilitation, help him reach an agreement with his creditors and allow him to embark on a new path.
In addition to the corona crisis, the entry into force of the new law pushed for an increase in the number of insolvency applications. Thus, for example, in the first quarter of 2019, 4,401 bankruptcy applications were filed, and in the first quarter of this year - before the outbreak of the corona and after the insolvency law came into force - 6,286 applications were filed. That is, a 42% increase in the number of bankruptcy applications regardless of the corona crisis.
The data from the Ministry of Justice's report show that in 2019, before the corona period, 16,378 applications were filed for bankruptcy proceedings (collection order or order to open proceedings), a decrease of about 17% in the number of applications for a collection order compared to 2018, when 19,854 applications were filed.