Jerusalem Court Rules Bankruptcy Trustee Exceeded Authority in Debt Case of Mother of Four

The Jerusalem Magistrate's Court recently ruled that a bankruptcy trustee overstepped his authority by investigating the origins of debts without court approval and attempting to cancel the bankruptcy proceeding of a mother of four. The woman, a dental assistant, owed 1.3 million shekels to credit companies Cal and Isracard, leading to the bankruptcy case. Trustee Adv. Ofek Eini believed the debts were incurred in bad faith, citing false declarations by the woman regarding her education, income, and mortgage status when applying for credit cards. However, the debtor, represented by Adv. Ze'ev Perel, argued the trustee exceeded his powers and that bad faith was not proven. She claimed her husband, who managed the family finances, was primarily responsible for the debts without her knowledge.

The official supervisor, represented by Adv. Bat-El Edri Ashush, unusually sided with the debtor, stating the trustee had no grounds to cancel the bankruptcy and had exceeded his mandate. The court referenced the law, which allows a trustee only to verify and approve or reject debt claims, with cancellation requiring court approval and evidence of fraud or collusion. Judge David Shaul Gabay Richter ruled the trustee acted beyond his authority by delving into the debt circumstances without a court order.

Despite rejecting the trustee's cancellation request, the judge found the debts were at least negligent if not made in bad faith, dismissing the debtor's claim of ignorance due to her husband's control over finances. The court extended the debtor's rehabilitation period beyond the standard three years to six years, requiring monthly payments of 1,000 shekels totaling 72,000 shekels, about 5.5% of her debts. Additionally, the debtor must attend financial management training as requested by the trustee.