Haifa Court Cancels Bankruptcy After Debtor Hid Thai Bank Account and Favored Creditors
The Haifa Magistrate's Court recently annulled a bankruptcy proceeding against a debtor who concealed financial activity in Thailand, engaged in prohibited creditor preference, and hid income from work. The case, initiated about four years ago, involved a rehabilitation plan agreed upon in January 2024, requiring the debtor to pay 29,400 shekels in 60 equal installments of 490 shekels each to the creditors' fund, in exchange for discharge.
After roughly two and a half years, the trustee requested cancellation of the proceeding in May, having discovered the debtor operated an active bank account in Thailand without disclosure. The debtor also failed to declare a debt to a specific creditor and repaid a loan to that creditor outside the bankruptcy process, constituting an illegal preference. Additionally, the debtor was accused of hiding income from other jobs and providing false information.
The debtor denied owning the Thai bank account and claimed the non-disclosure of the creditor debt was unintentional and made in good faith, asserting he paid only 600 shekels out of fear and lack of representation. He sought to reject the trustee's request and continue the rehabilitation plan.
Judge Tami Levi ruled to cancel the bankruptcy due to the debtor's "acute lack of good faith," which she said made continuation impossible. The ruling emphasized the debtor was represented throughout and had explicitly been questioned about the creditor debt, yet failed to disclose it. Payments to the creditor were made outside the process through the undisclosed account, and the debtor repeatedly presented contradictory facts and concealed material information and economic activity.
The judgment underscored transparency as fundamental to bankruptcy proceedings, stating that concealment equates to abandonment of the process. The court ordered that funds in the creditors' pool cover procedural expenses, with any remainder distributed to creditors. It also stipulated a cooling-off period and a 4,000 shekel deposit before the debtor may file a new bankruptcy request.
