Debt Collection in Israel
Unfortunately, some Israeli residents feel that they do not need to honor their financial obligations abroad due to the fact their debts will hardly be enforced against them in Israel by the foreign creditor. We think this is a dreadful practice causing serious harm to all honest Israeli residents and, therefore, we decided to build a department specialized in debt execution services in Israel for foreign clients.
If your invoice to an Israeli resident has remained unpaid, you should consider the following facts before acting or giving in:
The costs of debt execution in Israel are not very high and Israeli lawyers are allowed to take their fee as a percentage of the recovered amount. In other words: No recovery of debt, no fees for the lawyer. This arrangement can be expensive if the uncovered debt is high, but will still be worthwhile since it eliminates an important part of the cost risk.
Usually, debts from the amount of ca. 2,000 € are worth recovering.
Under Israeli law, a debt, which has been acknowledged in writing by the debtor, can be enforced in abbreviated proceedings. Therefore, for the execution lawyer, it is very important to receive all relevant documents, such as signed orders by the debtor, Email correspondence in which the debtor accepts an offered price, Email correspondence in which the debtor wrote that he or she “will pay soon” or made any other allegations with respect to the payment, etc.
Under Israeli law, a cheque may be immediately presented to the debt collection authority and there is only a limited list of arguments the debtor may invoke to his defense.
If you do not have a document in which the debtor acknowledges his or her debt, a claim for payment must be filed at the local court at the domicile of the debtor in Israel. This is usually bad news, due to the applicable court fee (2.5% of the amount of claim) and the additional, substantive work of your attorney. However, in particular with higher claims, it might be worthwhile: Whereas a claim will be time barred after a few years, a court ruling will remain a title for a much longer time. Further, some debtors usually pay if they see that a claim is filed against them in their hometown together with the necessary restriction orders.
From the above, you may extract some easy to follow advice for your current business to help avoid unfruitful debt execution proceedings at a later stage:
Always identify your client. Israeli residents have a fixed ID number and companies are registered with a registration or VAT number. With these numbers, the debtor may be located and identified in Israel at any time. Therefore, when issuing an order to an Israeli resident, always request the ID or registration number.
Have your Israeli client sign his or her order or at least, let him or her confirm it by Email.
Keep the documents that evidence the delivery of a certain order by you company.
Do not wait with the execution of your uncovered invoice. Waiting does usually not help. If the client does not pay, execute (not him, but the debt).