Debtor Must Pay Nearly $25,000 of Inheritance Despite Bankruptcy Discharge

A 65-year-old divorced woman in Israel, who lives on an old-age pension and rent assistance, will have to pay nearly 95,000 shekels (approximately $25,000) from an inheritance to her creditors, despite having received a discharge from a debt of about 91,000 shekels. The woman had filed for bankruptcy in the summer of 2022 due to a bank debt, citing financial difficulties following her divorce. Her initial rehabilitation plan involved minimal monthly payments, but she struggled to meet them and even requested a full waiver. She eventually managed to pay off the rehabilitation plan early, two and a half years ahead of schedule, and was granted a final discharge in March 2025.

A standard clause in her discharge order stipulated that any assets received within three years of the discharge would go to the bankruptcy estate. Less than a year after receiving the discharge, her stepfather passed away, leaving her an inheritance estimated at 320,000 shekels. The woman attempted to have the clause nullified, arguing the inheritance was acquired after the bankruptcy proceedings concluded.

However, the Tel Aviv execution registrar, Chen Levy, ruled against her. Levy cited a precedent and a Supreme Court ruling stating that "artificial waiting to receive funds cannot detract from creditors' rights." She determined that even though the woman had expedited her payments to receive the discharge early, the inheritance was acquired within the relevant three-year period. Levy acknowledged the woman's difficult financial situation, noting the inheritance was "all she had left in life."

Ultimately, the registrar ordered the woman to transfer 94,890 shekels to the creditors, leaving her with the remaining approximately 225,000 shekels of the inheritance. This decision aimed to balance the law's goal of maximizing the bankruptcy estate with the need to ensure the debtor has a minimal standard of living for the future.