Israeli Court Rules Bank Cannot Pursue Debt After Employee Leaves Job Despite Wage Assignment

A central Israel resident known as G faced debts totaling approximately 1.5 million shekels and entered insolvency proceedings aiming for a fresh start through debt discharge. Among his debts was a bank loan repaid monthly via a wage assignment, where the bank directly deducted payments from his employer. This arrangement made the bank a secured creditor entitled to continue receiving payments as long as G remained employed there.

Attorney Yosef Weitzman from the Weitzman Law Office identified a critical issue: if G changed jobs or was dismissed, the wage assignment would end, potentially allowing the bank to demand the remaining loan balance personally, despite the discharge. This scenario would effectively trap G in his current job to avoid personal liability for the debt.

Weitzman petitioned the court to clarify whether the bank could enforce the remaining debt after the wage assignment ceased. The court ruled that while the bank remains a secured creditor entitled to payments under the wage assignment, it cannot pursue G personally for the remaining debt once the assignment ends. This decision ensures that debtors like G can change jobs or improve their employment situation without fear of revived personal debt.

The ruling has broader implications for debtors repaying loans through wage assignments, reinforcing that secured creditors cannot circumvent debt discharge by relying on such assignments. Weitzman emphasized that a true discharge must allow debtors to rebuild their lives without ongoing personal financial threats, stating, "A discharge that prevents a debtor from leaving their job is not a real discharge."