Monthly payment in insolvency: how the amount is set, and what happens when you can’t pay

How is the monthly payment in insolvency set?

The formula is set in section 162 of the Insolvency and Economic Rehabilitation Law: the amount of the payments is set on the basis of your earning capacity, after deducting the living allowance from it.

• Earning capacity is your ability to earn from work and from any other source. The word “capacity” matters: the check is not only what comes into your account today, but what you are able to earn, in line with your personal circumstances.
• The living allowance is the amount that you and those you support need for basic living expenses in order to live with dignity, and the calculation takes into account the income of your spouse and of the children you support.

The monthly payment is set on the basis of the difference between the two. The Law also allows the court another way: if you have no penal payment that is not dischargeable, it may set the payment as a percentage of your earning capacity, even so that you keep more than the living allowance, in order to encourage you to increase your income.

And what if your earning capacity does not exceed the living allowance? Then the court will not impose a duty to make payments, and will give an immediate discharge. The exception: a person for whom there is a ground to extend the payment period receives an immediate discharge only in special circumstances.

The living allowance: what counts, and how it is calculated today

The Law requires the Minister of Justice to set, with the approval of the Constitution, Law and Justice Committee (of the Knesset), the method of calculating the living allowance and earning capacity. According to a special report of the State Comptroller from November 2024, such regulations had not been made by the end of the audit (September 2023). Since May 2020 the Commissioner has worked according to a “criteria procedure” it published, which defines the parameters for calculating the monthly payment, taking into account the amount that should be left with the debtor. In December 2021 a change was made to the procedure, and draft regulations were published for public comment in March 2022. According to the Commissioner’s annual report for 2024, the monthly payment is still set according to this procedure.

What this means for you:

• The amount left with you is derived from the makeup of the household and from the income of all the household members that the Law lists, and not only from your salary.
• The Commissioner and the court adapt the calculation to your personal circumstances, so documents on exceptional expenses, such as medical treatment, are part of the application and not an extra.
• There is no calculator on this site that calculates the payment, because the full rules are not published in legislation. What you can prepare in advance is a full and accurate picture of income and expenses, in exactly the format the reports require (see below).

In the interim period and in the economic rehabilitation order: who decides, and when

From the order to open proceedings to the economic rehabilitation order (the interim period). When the order is given, the Commissioner sets the living allowance that will be allocated to you from your income. The Commissioner may order that you keep the living allowance and transfer the balance to the trustee in periodic payments, in the manner the Commissioner sets.

In the economic rehabilitation order. After the trustee examines your situation and the Commissioner submits a proposal, the court sets in the order the duty to make payments, the amount and the period, or an immediate discharge. In the low-debt track, which is conducted before the Execution Registrar, the power to give the economic rehabilitation order lies with the Registrar.

The payment period. As a rule, three years from the day of the economic rehabilitation order. The court may shorten it in personal circumstances that justify it, and extend it on the grounds in the Law, among them: lack of good faith in the proceeding, failure to cooperate with the trustee or the Commissioner, breach of the restrictions, a debt from a significant transaction made when you knew, or should have known, that there was a high chance you would not meet it, gross negligence in bad faith, preferring creditors or hiding assets, and a previous order in the seven years before. In serious cases the period may be unlimited in time, and in special and exceptional economic circumstances the court may extend it even without these grounds.

How much people actually pay, and for how long

The Law does not set a minimum or maximum amount, but a formula. The Commissioner’s official figures for 2024 give a picture of what happens in practice: averages, not a forecast for any particular file:

The practical conclusion: three years is the starting point in the Law, but in 2024 most orders set a longer period. It is wise to enter the proceeding assuming that the period may be extended, and to be careful about what the Law lists among the grounds for extension: cooperation, keeping to the restrictions, and full reporting.

Allowances, maintenance and money that arrives after the order

National Insurance allowances. A cash benefit from the National Insurance Institute (Bituach Leumi) is protected from attachment and cannot be transferred, also 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. The Law states expressly that the rules on the living allowance and on the duty to make payments do not detract from these protections.

Maintenance you pay. 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, usually at the level paid before the order, and this amount can be set even if what is left with you falls below the amount protected from attachment under the Wage Protection Law, 5718-1958.

An inheritance, compensation or another asset that arrives during the payment period. Any asset that comes to you during the payment period goes into the insolvency estate, except for the income on whose basis the payments were set and assets that the Law excludes. A person who received an immediate discharge may be required to transfer to the estate assets that come to them during a period the court set, up to three years (and in exceptional circumstances, longer).

A one-time payment instead of installments. You cannot simply bring the payments forward or “close” them with one sum: this requires an application to the court to change the order, and the court will approve it only if it is proved that the money is not part of the assets of the insolvency estate.

Your income has changed: how to change the monthly payment

• In the interim period: the Commissioner may, on the Commissioner’s own initiative, at your request or at a creditor’s request, change the living allowance and the method of payment when circumstances have changed or new facts have come to light.
• After the economic rehabilitation order: an application to change the amount of the payments because of a change in circumstances is filed with the Commissioner, who decides on it after the creditors have been able to state their position. Other changes to the order, such as shortening or extending the period, are within the court’s power.
• The Commissioner may also leave additional amounts with you from your income, if you or those you support need them.
• Appeal. An appeal, or an application for leave to appeal, against a decision of the Commissioner or of the Execution Registrar is filed with the Magistrates’ Court within 45 days from the day the decision was served on you.

Remember: even without an application, you must notify the trustee as soon as possible of any change in a detail of your financial situation that you reported.

You did not pay for a month: what may happen

• A direct transfer from the employer. If a payment was not transferred on time, the court may, at the trustee’s request, order whoever pays you your income to transfer it directly to the trustee, and the trustee transfers the balance to you.
• Extension of the period. The court may extend the payment period if you did not meet the terms of the order, including the duty to make payments. If the Commissioner applies for an extension because of non-compliance, the payment period is extended until the court decides.
• Cancellation of the order. In a proceeding that you opened yourself, the court may cancel the order to open proceedings if you breached the terms of the order in a way that substantially harmed the conduct of the proceeding; it may delay the cancellation in order to restore restrictions and attachments that were canceled with the order.
• Cancellation of the discharge. Even after the discharge, a breach of a material term of the order can lead to its cancellation.

If it is clear that a particular month will not be covered, it is better to file an application for a change before the payment is missed, not after.

The two-monthly report: what to submit, and why it matters

From the order to open proceedings until the economic rehabilitation order, you submit to the Commissioner a report on income and expenses once every two months, and after the economic rehabilitation order, once every six months, unless you were instructed otherwise. The report covers the income and expenses of you, your spouse, your minor children and those you support, signed and backed by supporting documents. It is submitted online, and a person who is not represented may hand it in at the Commissioner’s offices or send it by registered mail.

These reports, together with the report you attached to the application on the two years before it, are the basis on which it is decided how much is left with you and how much is transferred. A full and consistent report saves questions and demands for documents later on. For the overall picture of the proceeding: insolvency of an individual, from the application to the discharge.

Frequently asked questions

How much do you pay per month in insolvency?

There is no fixed amount in the Law: the payment is set on the basis of earning capacity minus the household’s living allowance. In proceedings opened with the Commissioner in 2024 at debtors’ request, the average payment was NIS 1,608 and the median NIS 1,480.

Is my spouse’s income included in the calculation?

Yes. The living allowance is calculated taking into account the income of your spouse and of the children you support, and the periodic reports also include their income and expenses.

Why is my period longer than three years?

Three years is the default, and the court may extend it on the grounds in section 163, such as failure to cooperate or a debt from a significant transaction made when you knew, or should have known, that there was a high chance you would not meet it, and also in special and exceptional economic circumstances. In 2024 the average period was 52 months.

Can the monthly payment be reduced?

You can ask, when circumstances have changed. In the interim period you ask the Commissioner to change the living allowance; after the economic rehabilitation order, an application to change the amount of the payments is filed with the Commissioner. You can appeal the decision to the Magistrates’ Court within 45 days.

Can my disability or old-age pension be taken from me?

Benefits from the National Insurance Institute are protected: they are not subject to attachment, the right to them does not pass to the trustee, and the Law states that the rules on the living allowance and the payments do not detract from this protection.

What happens if I have nothing at all to pay with?

If your earning capacity does not exceed the living allowance, the court will not impose a duty to make payments and will give an immediate discharge, unless there is a ground to extend the period, and then only in special circumstances.