Among the clients who recently contacted our office was a man whose debts under execution totaled over a million NIS, and asked for our advice: How can the debts be paid off?
Debts are like an abscess, starting small, often left untreated, and then becoming an infection that requires dramatic surgical intervention. So are debts - many times people avoid dealing with them when the debts are small, and then the debts grow so large that without intensive legal intervention, they cannot be gotten rid of.
Each of us who comes to open a bank account, even if he only takes out a minimum credit limit, or if he takes out a loan, undertakes that if he exceeds the credit limit or loan repayments, he will pay for it. Abnormal interest rate. The abnormal interest rate is 17% - 25% per year. This interest rate is called ""Notional interest""Because it was agreed upon with the bank. This means that in the worst case, when that customer exceeds the limit, or is in default in loan payments, the interest that will apply may reach For a quarter (!!!) From the debt and compound interest to the almighty and the almighty.
For example, the same client came to us with a debt that began many years ago, amounting to several tens of thousands of shekels, while today, the debt registered as his debt in execution stands at over a million shekels.
The bank 'forgot''
The debt consists of the principal and a "biting" interest of approximately 2000% (thousands of percent!!!). In retrospect, the client tells us that if he had known this would be the case, he would not have neglected the treatment and paid on time. However, as mentioned, the tendency to procrastinate and neglect payments at the 90th minute exists in all of us, and so it turned out that the client rolled over with the debt.
Meanwhile, the bank to which the debt is owed has "forgotten" about the enforcement file, since it has not filed a single request there in all these years, and so it happened that in the bank's books the debt was probably written off over a decade ago, but the customer still finds himself "stuck" with a debt of over a million NIS, and in fact cannot manage financially. The bottom line is, despite the "writing off" of the debt from the bank's books, if the customer now comes to the bank to close the debt - the bank will demand the amount of the debt in the file as it appears in the enforcement - no less!!!
The enforcement system is a system that enforces court decisions. It does not take into account the debtor's situation - and we are not talking about a payment arrangement at the expense of the action, but rather the debt rate, and therefore it is obliged to apply the contractual interest rate that was determined between the bank and the customer when the customer, as stated above, opens an account or takes out a loan, as determined by the bank when opening an enforcement case.
Therefore, a client who wants to get rid of debts cannot find the solution in the enforcement system, which adds high contractual interest every year. In the well-known calculation of compound interest, a debt of several tens of thousands of shekels from 15 years ago can today amount to about a million shekels.
So what do we do anyway?
Since it is clear to the client and it is also clear to us that even if he continues to work until the age of 120, he will not be able to pay off the debt, which accumulates insane "biting" interest every year, the obvious conclusion is that the only option is to resort to a "dramatic surgical" solution within the framework of bankruptcy proceedings.
As part of these procedures, it is possible to "haircut" the debt to the bank.
What are things supposed to be?
The Bankruptcy Ordinance and court rulings state that once a person becomes bankrupt, they can "count" their majority Interest debt. The courts have repeatedly ruled that from the moment a person becomes bankrupt, equal interest will apply to his debts to all his creditors. The courts have also ruled that equal interest will apply from the time the bank stopped honoring the obligations in the account - that is, from the moment the bank began returning payment instructions, not honoring checks, canceling credit cards, etc.
If we return to our client, despite the heavy price of a bankruptcy proceeding, which is a long and unpleasant process, it is possible to legally "write off" most of the debt, whether the bank agrees or not, and set the debt at a reasonable amount that can be paid - and perhaps an additional haircut can also be performed on it, since in a bankruptcy proceeding, generally no debts are paid at all - thus allowing the client to turn a new page in his life.
The above is a process that occurs on a daily basis in many bankruptcy cases, so there is a solution and remedy for those who owe money to banks, whose debts in execution have, as stated, reached monstrous proportions and are seemingly at a dead end.
Lawyer Yuval Yishai From the office Wolfson Weinstein & Co.', Engaged inCommercial and corporate law, Dissolution and rehabilitation of companies
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