As more Israelis start to take on debt, it’s becoming clear that many people are lacking the resources to adequately satisfy the debts that they’re taking it on. Regular people are having trouble making their mortgage payments, and it’s also difficult to make monthly rent payments.
Consumer debt is on the rise, and when 35% of married and 39% of nonmarried people spend more than they earn each month, it’s going to create a bubble that’s just waiting to pop.
Low-income households are outspending their income by as much as 23% in some cases, and the poor are forced to put expenses on their credit cards.
It’s a dilemma, and some people may be considering absolving their debt.
Israel’s path to filing for bankruptcy, from what I understand, was a complete mess until a few years ago. The fees were expensive, and the time it took to absolve debt took many years. The process took so long that many debtors didn’t want to pursue bankruptcy.
When the process is complicated, it often doesn’t make sense for people to follow through with it – it’s too much work.
Bankruptcy procedures have changed, allowing for an easier, cheaper means of declaring bankruptcy. Debtors are able to liquidate their assets, and debt is able to be resolved so that a person can have a new, fresh start to their financial lives.
Fees have also been reduced, and while the process is never an easy one, it is one that can provide a huge relief.
But before going through the bankruptcy process, there may be other alternatives available. Back in 2015, some NIS 10-billion in debt was under consideration to be wiped out. These lucky individuals, often poor, would be made debt-free. The problem is that there is no sure-fire guarantee that the government will take appropriate actions against debt.
It’s up to the debtor to work on their finances to help dig themselves out of debt.
Consolidation is an option, and this will require IVA advice. A few pointers are to find your debts, and calculate your total payments and interest. Oftentimes, you can consolidate your debt at a lower interest rate, paying one, low payment and paying off your debt over time.
When this happens, you’re still going to be paying off your debt, but it will be at a lower interest rate, which equates to savings over time.
After all avenues of repayment are exhausted, it’s time to file a motion for bankruptcy. Creditors will be put on hold, and the debtor will be granted immediate protection. Restrictions from Hotza’a La’Poal will be halted within days, and proceedings will last for around 18 months.
During this time, financial reports will need to be submitted and payments made to the creditor’s fund.
Once this is all done, and no issues arise, the court will then decide whether or not additional payments will be made for up to three years, or if the debt is absolved immediately.
Bankruptcy should only be considered in the most serious of cases, when there are no other forms of repayment that may work. But when there are no other options, bankruptcy will provide you with financial relief and a means to start rebuilding your financial advice.