Bankrupt Israeli to be Jailed for Two Weeks Over Unpaid Debts

Bankrupt individual Rafael Rubinstein is scheduled to be imprisoned for two weeks starting October 28th due to his failure to comply with court orders regarding his financial obligations. The decision was made by Supreme Court Justice Ruth Ronen, who dismissed Rubinstein's appeal. This marks at least Rubinstein's third jail term in the 11 years of proceedings, following a previous imprisonment in the U.S. and the loss of his villa in Savyon. His total debt amounts to 2.2 million shekels.

Rubinstein, 70, an Israeli-American citizen, previously stated that from the early 2000s until 2014, he was involved in real estate marketing in the U.S., recruiting investors for AG Homes. He served ten months in federal prison for business-related offenses and received a suspended sentence. He claimed his base salary was $1,300 per month, plus $5,000 for each investor recruited. Between 2012 and 2017, Rubinstein and his family lived in a Savyon villa, paying $6,000 monthly, before being evicted and moving in with his wife's parents.

In 2016, the couple purchased cars worth 250,000 shekels. In March 2015, a month before an order to seize his assets, Rubinstein sold a plot of land for 600,000 shekels, claiming he had forgotten about the transaction and thus did not report it. In November 2015, Judge Irit Weinberg-Netovitch ordered Rubinstein to pay 2,000 shekels monthly. By 2018, he offered to pay 900,000 shekels towards his debts, to be raised from distant relatives, while simultaneously requesting a reduction in his monthly payments to 100 shekels, a request that was denied.

The trustee for his assets, attorney Gila Hachmon, sought an arrest warrant for Rubinstein. In July 2018, Weinberg-Netovitch granted the request, noting Rubinstein's failure to provide truthful reports and his accumulation of a 34,000 shekel debt, concluding that there was no other way to compel his compliance. She stated, "The impression is that the debtor does not internalize his obligations and only enjoys the benefits of the process," imposing a ten-day jail sentence.

In March 2022, the court ordered Rubinstein jailed for 14 days for continued non-payment and failure to submit required reports. The arrest order was renewed in September 2023 and July 2024, but the latter was canceled when Rubinstein paid the required sum. However, in January of this year, Hachmon again requested his arrest due to non-payment of a 2,500 shekel monthly installment agreed upon in November 2024, with arrears totaling 35,000 shekels by May.

In an August ruling, Judge Gilad Lubinsky-Ziv stated that Rubinstein appeared to be conditioning his compliance with the proceedings on the approval of a creditors' arrangement he proposed, which was not accepted by the creditors. Lubinsky-Ziv emphasized that bankruptcy proceedings are not "a la carte" and debtors cannot dictate terms or obligate creditors to accept their proposals. He concluded that all conditions for issuing an arrest warrant were met, finding that Rubinstein was capable of complying but deliberately refused, and that given the history of the case and Rubinstein's conduct, an arrest warrant was the only proportionate measure. Lubinsky-Ziv described Rubinstein's behavior as among the most severe he had encountered in bankruptcy cases, adding that canceling the proceedings due to the debtor's failures was not appropriate, especially since the case was initiated by a creditor and a dividend was expected from the bankruptcy proceedings of Rubinstein's wife.

Lubinsky initially ordered Rubinstein jailed for ten days at Hadarim Prison starting October 14th, but postponed the execution to October 28th due to Rubinstein's appeal to the Supreme Court. Justice Ronen dismissed the appeal, stating that while an arrest is an extreme measure, the lower court's decision was justified. She noted Rubinstein's insistence on conditioning payment compliance on the advancement of his proposed arrangement, and his explicit statement that he would not transfer money under the payment order but only within the framework of a creditors' arrangement. Ronen upheld the lower court's finding that an arrest warrant was the only way to compel Rubinstein to fulfill his obligations. She also rejected Rubinstein's claim of financial inability to pay the 2,500 shekel monthly sum, which he had agreed to, stating he had not presented any change in circumstances and his claims of financial inability were unsubstantiated. Rubinstein was represented by attorney Adi Rosenstein.