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Fee Exemption in Insolvency Proceedings

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On June 13, 2021, ACRI, along with Haifa University’s Clinic for Rights in Civil Proceedings, submitted comments on regulations regarding the fees required to commence insolvency proceedings.

In the past, interim instructions established that a total fee of 1,600 shekels must be paid, and that only individuals aided by legal representatives are exempt from paying this amount. The current draft of the regulations seeks to change this temporary measure to a permanent directive, despite criticism of the costly fee, the restrictive exemption policy, and the absence of exemption applications. The only proposed change is to reduce the fee’s amount from 1,600 to 1,400 shekels.

Currently, a family of two parents and two children with a collective income of 8,000 shekels, would be ineligible for legal aid. Thus, in order to initiate insolvency proceedings, the family would need to hire a lawyer, costing them tens of thousands of shekels, and would be denied the possibility of seeking an exemption from such a costly fee.

In our comments, ACRI’s Directory of Policy Advocacy Attny. Debbie Gild-Hayo and the Clinic’s Reut Cohen, claimed that the proposed regulations are unconstitutional as they violate the rights to equality, a dignified existence, and access to justice. Moreover, they oppose previous High Court of Justice rulings. The attorneys further pointed out the absurdity that, amid a procedure entirely aimed to enable people trapped in debt to start anew without sinking further into poverty and distress, the state poses further challenges and barriers that are liable to prevent them from commencing a process to actualize their rights. We argue that the regulations must be amended such that they grant discretion to the insolvency commissioner or the judge and execution registrar, to offer deferrals for payments of fees, and (full or partial) exemptions on an economic basis, similar to the court’s regulations (fees).

On July 6 ,2021, the Constitution, Law and Justice Committee held a discussion on regulations. Our position was accepted, and the regulations relating to the collection of fees to commence procedures were extended as a temporary order for three more months. During this period, an outline will be formulated that will not automatically require the payment of a fee of 1,400 shekels from any debtor without legal representation.

We intend to ensure that the outline taking shape addresses all populations in need of fee exemption, including those eligible for legal aid from the state who choose other representation, or those not legally entitled to legal services, along with other populations that cannot afford the payment due to their economic status. We will ensure that the outline includes the possibility for anyone to request an exemption from, reduction, or installment payments of the fee, on a case-by-case basis per respective financial circumstances, just as is made possible with fees for court proceedings.

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