Tax offender denied financial rehabilitation: "Discharge will not help"

A tax offender owing more than one million shekels in VAT will not receive financial rehabilitation. Jerusalem Magistrate's Court Judge Ofer Yuval recently ordered the cancellation of his insolvency proceedings, ruling that even with a discharge, the debtor would remain burdened by massive liabilities, making the continuation of the legal process a waste of judicial resources.

The 63-year-old man was convicted of tax offenses committed through his company, which involved the issuance of fictitious invoices. He served a 15-month prison sentence and paid a 30,000 shekel fine. In September 2024, his second insolvency proceeding was initiated, following the cancellation of the first due to abuse of process.

The outstanding debts total approximately 1.43 million shekels, of which 1.2 million—including roughly one million shekels in VAT—are not dischargeable. The Official Receiver, the trustee, and the Israel Tax Authority unanimously argued for the termination of the proceedings, noting that the debtor had not made any payments toward his civil debt or attempted to rectify the damage caused to the public treasury.

While the debtor claimed he was seeking a fresh start and offered 60,000 shekels as a condition for discharge, the court rejected the proposal. Judge Yuval stated: "There is no doubt that the individual will remain insolvent at the end of the proceeding even if he is discharged from debts that are eligible for discharge. These are debts totaling more than 1.2 million shekels that the individual is unable to repay."

The court noted that 85% of the debt portfolio was created through fraud and is therefore not dischargeable. The ruling concluded by canceling the insolvency proceedings and imposing a 18-month cooling-off period before a third application can be filed.