The number of bankruptcy applications in Israel is expected to grow substantially in 2021, a senior Justice Ministry official said on Tuesday.
"I estimate that we will see further increase of several thousand in bankruptcy applications next year," the Justice Ministry's Commissioner of Insolvency Proceedings Sigal Yakobi told Ynet in an interview, referring to a report she published on Monday according to which the number of bankruptcy applications in Israel grew by 41% in 2020 compared to the previous year.
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Woman walking past shuttered business in Jerusalem during COVID-19 pandemic
(Photo: Amit Shabi)
"We are talking about 20,000 individuals a year who apply to open proceedings and about 1,200 corporations."
However, Yakobi reserved that the trend could be attributed to the Law of Insolvency and Economic Recovery which came into effect in September 2019 and facilitated the process for individuals and corporations.
"We can only link a minority of cases to the coronavirus crisis," she said. "Insolvency does not come immediately with the crisis, but a few months after because people are trying to get organized, to survive with the resources they have, with new credit."
"Twenty years ago, we had 300-500 bankruptcies a year. Today it is over 20,000. If we need to point out a key factor in this issue, we will need to track the increase in credit for households. We see many more borrowers entering insolvency processes due to poor economic conduct and not necessarily business conduct."
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Justice Ministry Commissioner of Insolvency Proceedings Sigal Yakobi
(Photo: Moti Kimchi)
"In a significant number of insolvency proceedings of individuals - and we are not talking about businesses at all, but about households that have consumed credit beyond their means and at some point – they have defaulted on their loan payments and entered a state of insolvency."
"Numerous people and corporations that go into insolvency, do it too late, at a stage when it is no longer possible to save them. Businesses tend to apply at a much later stage than individuals. The Insolvency Law creates all sorts of incentives designed to encourage corporations to apply earlier to try to save the business… but people quite clearly come when it's too late and they have no other alternative [but to close down the business]."