Stay of proceedings in insolvency: what stops with the order, and what continues

What stops on the day an order to open proceedings is given?

In an individual’s insolvency proceeding, the “stay of proceedings” starts on the day the order to open proceedings is given, not on the day the application for the order was filed. In the Law it is called a “freeze of proceedings”, and section 121 provides that when the order is given, the proceedings against the individual are frozen, and if restrictions were imposed on them in collection proceedings, those restrictions are void.

What “freeze” means, under section 29, which also applies to an individual:

• Collection proceedings for past debts cannot be opened, and collection proceedings that have not yet been completed cannot be continued.
• A new attachment cannot be imposed on an asset in the insolvency estate, and an attachment imposed before the order is void.
• Legal proceedings against you cannot be opened or continued, except with the court’s permission, and only for special reasons.
• An asset of the estate cannot be charged to secure a past debt.
• From the day of the order, no late-payment surcharge is added to a fine or another penal payment that is a past debt.

A “collection proceeding” is not only a file at the Execution Office. The definition in the Law also includes collection under the Center for the Collection of Fines, Fees and Expenses Law, 5755-1995 (חוק המרכז לגביית קנסות, אגרות והוצאות, התשנ״ה-1995), collection under the Taxes (Collection) Ordinance (פקודת המסים (גבייה)) and any law that gives similar collection powers. A “past debt” is a debt you owed on the day of the order, even if it is conditional, or a debt arising from an act or omission before the order, together with the interest and linkage added to it until it is paid.

What happens to the debts from here? They do not disappear. The assets of the insolvency estate are available only to pay the past debts and the costs of the proceeding, and the debts are paid only according to the Law and the order of repayment. The creditors file proofs of debt with the trustee within six months of the publication of the order. What determines repayment from here is the economic rehabilitation order, at the end of which there may be a discharge, not the freeze itself. See the whole proceeding, from the application to the discharge.

Attachments, salary and money already collected

An attachment on your salary or bank account. An attachment imposed before the order is void, and a new attachment cannot be imposed on an asset of the estate. In practice, your income from now on is divided according to the instructions of the Commissioner (the Insolvency and Economic Rehabilitation Commissioner): the Commissioner sets a living allowance that stays with you, and may order you to transfer the rest to the trustee in periodic payments.

One exception worth knowing: an attachment that has the status of a pledge under section 12A of the Taxes (Collection) Ordinance is not void when the order is given.

When a collection proceeding counts as “completed”. For an asset, when the creditor has received the full proceeds of its sale; for the attachment of a debt, for example money attached with a third party, when the debt has been paid to the creditor. This leads to two situations:

• An asset that was seized and not yet sold on the day of the order returns to the insolvency estate, and the costs of the seizure are a first charge on it. If it was sold and the creditor has not yet received the money, the proceeds, minus the costs, go into the estate.
• Money that reached the creditor before the order usually stays with them. The court may cancel an act that preferred one creditor, including within a collection proceeding, if it was done in the three months before the application was filed (for a creditor who is a relative, in the year before it) and at a time when you were in a state of insolvency. The Law does not allow canceling, among other things, a payment made by an individual to a person who is not their relative in an amount not exceeding NIS 5,897.43 (2026 amount), or a payment of maintenance under a judgment.

National Insurance benefits. A cash benefit from the National Insurance Institute (Bituach Leumi) cannot be attached, including in the bank account, for 30 days from the day it was paid, except for the payment of maintenance, and the right to the benefit does not pass to the trustee. For what is protected from attachment even before insolvency, see Your bank account was attached.

What an order to open proceedings does not stop

Criminal and administrative proceedings. The freeze does not apply to them, except for collection proceedings. In other words, an investigation, a criminal trial or a proceeding before an authority continues, but collecting a past debt through them stops. An administrative authority may not make an act of its own conditional on paying a past debt that has been frozen. In exceptional circumstances, the court may also freeze a proceeding to impose a monetary sanction.

A secured creditor: a mortgage, a charge (lien) on a car. After the order, a secured creditor may recover from the asset charged in its favor, subject to the rules in the Law and the order of repayment: it must file a proof of debt and notify the trustee of its intention to enforce, and the trustee may redeem the asset within 14 days; when the value of the asset is clearly higher than the debt, the enforcement is carried out by the trustee, and when the Commissioner has ordered that your business continue to operate, only with the court’s approval. The freeze only makes the enforcement subject to these rules. A late-payment surcharge from the day of the order is not included in the secured debt, and a balance not covered by the asset is an ordinary debt.

Guarantors and other debtors. The freeze applies to proceedings against the debtor themselves. A proceeding against someone who guaranteed your debt, or against a joint debtor, does not, as a rule, stop because of the order given to you.

New debts. A debt created after the order, which does not arise from an act or omission before the order, is not a “past debt”. The freeze does not apply to it, so a new obligation that was not paid is exposed to ordinary collection proceedings.

Ongoing maintenance. Maintenance under a judgment that falls due after the order continues to be paid: the Commissioner allocates to the person entitled an amount from your income or from the estate, usually at the level paid before the order, until the court decides.

A duty under law. The order does not exempt you from complying with a provision of law, including an administrative decision, except for the duty to pay a past debt.

Between the application and the order: is there already a stay?

In the insolvency proceeding, a general freeze starts only with the order. For an individual’s application that meets the conditions, the Commissioner gives the order within 30 days of the filing of the application, and if the Commissioner asked for further information or summoned you to a hearing, within 30 days of receiving the information or of the end of the hearing. Within the insolvency proceeding there are two specific tools during this period:

• A pending proceeding in a court or in the Labor Court. From the moment an application for an order has been filed, you or a creditor may ask the court or tribunal where the proceeding is being heard to stay it until a decision is made on the application. The court or tribunal weighs the harm to each party, good faith and proportionality. This does not apply to criminal and administrative proceedings.
• An application filed by a creditor. When a creditor has filed an application for an order with the court, the court may, at the request of a creditor or at your request, grant interim relief, including a prohibition on paying past debts and a freeze of proceedings. As a rule, such relief also applies the restrictions of the interim period.

If your total debts do not exceed NIS 176,923.12 (the 2026 amount), the application is filed with the Execution Registrar and not with the Commissioner. A person who cannot pay the judgment debt even in installments files a notice to that effect with the Registrar, and for debts not exceeding NIS 150,000 (an amount in the Execution Law, 5727-1967 (חוק ההוצאה לפועל, התשכ״ז-1967) that is not updated), the notice itself counts as an application for an order to open proceedings in the low-debt track; above NIS 150,000 and up to NIS 176,923.12, you file an application with the Registrar. What to do when the warning has already arrived: You received a warning from the Execution Office.

The tax authorities, the National Insurance Institute and fines

Debts to authorities are past debts like any other debt, and the freeze applies to their collection: the definition of “collection proceeding” expressly includes collection under the Taxes (Collection) Ordinance and under the Center for the Collection of Fines Law. The exception is an attachment that has the status of a pledge under section 12A of the Taxes (Collection) Ordinance, which remains in force.

As for fines: once the order is given, no order of imprisonment in lieu of a fine will be given, and from the day of the order no late-payment surcharge is added to a fine that is a past debt. Note that the freeze on collection does not erase the fine, and a penal payment is not erased even by a discharge. Where each debt stands in the order of repayment: Order of debt repayment in insolvency.

The restrictions that replace the Execution Office restrictions

The restrictions imposed on you in Execution Office files are void once the order is given, but the restrictions of the interim period begin, until the economic rehabilitation order:

• a restriction on obtaining, holding or renewing a passport, provided that it remains valid for returning to Israel;
• a stay of exit from Israel;
• a restriction as a specially restricted customer under the Cheques Without Cover Law, 5741-1981 (חוק שיקים ללא כיסוי, התשמ״א-1981);
• a restriction on using a charge card, except for a card that can be used only against a credit balance;
• a restriction on setting up a new corporation, if the trustee finds that this risks harming the creditors.

In addition, from the day of the order until the end of the proceedings, you may not obtain credit without the Commissioner’s approval, except for living expenses for which the Commissioner has given instructions, and anyone who obtains credit must state that they are in insolvency proceedings. The Commissioner may remove a restriction, in whole or in part, also subject to conditions or security, after giving the creditors an opportunity to state their position, and in an urgent case even immediately. What is recorded about you in the credit data database: Credit data: four rights you have.

Limitation period, new debts and cancellation of the order

Limitation. The period during which the proceedings are frozen does not count toward the limitation (prescription) period. From a creditor’s point of view, the freeze does not “run” the clock in your favor.

Canceling the order brings the proceedings back. Anyone harmed by the order may ask the court to cancel it within 45 days of the publication of the notice about it. In a proceeding you opened yourself, the court may cancel the order if you acted without good faith, did not cooperate, or breached the restrictions or the conditions of the order in a way that materially harmed the proceeding. It may also cancel an order when it turns out that you are not in a state of insolvency. In both cases the court may postpone the cancellation to allow the restrictions and attachments canceled by the order to be restored.

Frequently asked questions

Does the stay of proceedings in insolvency already start when the application is filed?

No. In an insolvency proceeding, the general freeze starts when the order to open proceedings is given. From the filing of the application, you can ask to stay a proceeding pending in a court or in the Labor Court, and on a creditor’s application the court may grant interim relief.

Does the attachment on my salary stop after the order?

Yes. An attachment imposed before the order is void, and a new attachment cannot be imposed on an asset of the insolvency estate. From your income, you keep the living allowance set by the Commissioner, and the Commissioner may order you to transfer the rest to the trustee.

Can a creditor keep suing me in court?

As a rule, no. After the order, legal proceedings against you cannot be opened or continued without the court’s permission, which is given only for special reasons. Criminal and administrative proceedings are not frozen, except for collection.

Can the bank enforce the mortgage on the apartment?

The freeze does not cancel a secured creditor’s right to recover from the asset charged in its favor, but enforcement is subject to the rules in the Law: filing a proof of debt, notice to the trustee, the trustee’s option to redeem the asset within 14 days, and the order of repayment.

Does the order also protect my guarantor?

As a rule, no. The freeze applies to proceedings against the debtor who received the order. A creditor may continue proceedings against a guarantor or a joint debtor.

After the order, can I travel abroad?

During the interim period there is a stay of exit from Israel, together with restrictions on a passport, a charge card and setting up a corporation. The Commissioner may remove a restriction, also subject to conditions or security, after giving the creditors an opportunity to state their position.