Family Law & Insolvency
Divorce and Insolvency in Israel
What Happens to the Assets
When divorce and bankruptcy collide, the stakes are exceptionally high. Adv. Liron Elmaliach advises clients navigating the intersection of family law and insolvency — protecting assets, alimony rights, and pension entitlements.
Divorce is rarely simple. When one spouse is also insolvent — or on the verge of insolvency — it becomes dramatically more complex. Two separate legal regimes, family law and insolvency law, operate simultaneously and often pull in opposite directions. The family court cares about fairness between spouses; the insolvency trustee cares about paying creditors.
Understanding how these two systems interact is essential for protecting what is rightfully yours. A property division agreed in divorce proceedings can be undone by the insolvency trustee if it was not structured correctly. Alimony you are owed may rank ahead of other creditors — but only if you enforce your rights in the right forum.
Adv. Liron Elmaliach combines expertise in family law with a thorough understanding of the Insolvency and Economic Rehabilitation Law, 2018, to guide clients through this uniquely difficult intersection.
How Bankruptcy Affects Property Division
When a spouse is declared insolvent, an insolvency trustee takes control of their assets. The trustee's duty is to realise those assets and distribute the proceeds to creditors — and this duty may clash directly with your rights as a divorcing spouse.
Assets protected from creditors: Not all assets pass to the trustee. Certain personal items, basic household goods, tools of trade, and — critically — most pension savings are exempt from attachment. Understanding which assets fall outside the trustee's reach is the first step in protecting yourself.
Timing of property transfers: The timing of any transfer of property between spouses is crucial. Transfers made close in time to insolvency — especially transfers to a connected person like a spouse — are subject to a statutory look-back period during which the trustee can seek to reverse them. A transfer made years before insolvency, for genuine consideration, is far safer than one made when the spouse was already in financial difficulty.
Preferential transfers set aside: Under the 2018 Insolvency Law, the trustee may apply to court to void transactions that preferred one creditor (or a connected person) over others, or that were made at an undervalue. A property settlement that hands the family home to a non-insolvent spouse without adequate consideration is exactly the type of transaction the trustee will scrutinise.
Alimony and Child Support in Bankruptcy
One of the most important questions divorcing spouses ask is whether a bankrupt spouse can simply stop paying alimony by hiding behind their insolvency. The answer is a clear no.
Alimony debts are not dischargeable: The Insolvency and Economic Rehabilitation Law, 2018 expressly excludes alimony and child support obligations from the general discharge that an insolvent person receives at the end of the rehabilitation process. A debtor who emerges from bankruptcy remains liable for every shekel of alimony they owe — past and present.
State alimony as a safety net: Where a spouse cannot pay court-ordered alimony because of genuine insolvency, the National Insurance Institute (Bituah Leumi) operates a state alimony scheme. This provides a minimum monthly payment to the entitled spouse and children, funded by the state, while NII pursues the debt against the payer independently.
Creditor hierarchy — alimony is preferred: In the distribution of an insolvent estate, alimony and child support claims rank as preferred debts — meaning they are paid before ordinary unsecured creditors. If there are assets available, you stand near the front of the queue. Enforcing your position in the insolvency proceedings requires formal registration of your claim with the trustee — something your attorney must do proactively.
Frequently Asked Questions — Divorce and Bankruptcy
Common questions about insolvency and divorce in Israel
Protect Your Rights — Even When Your Spouse Is Insolvent
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