Many people still say “bankruptcy” (pshitat regel), but the legal framework changed in 2019. Here is the practical difference — and why it matters for you.

The old world: the Bankruptcy Ordinance

For decades, personal debt relief in Israel ran under the Bankruptcy Ordinance. The process was often slow, stigmatising and focused on liquidation. “Pshitat regel” (literally “leg-spreading”) carried a heavy social stigma.

The new world: the 2018 Law

The Insolvency and Economic Rehabilitation Law, 5778–2018 (in force since 15 September 2019) reframed everything around rehabilitation. The emphasis shifted from punishing the debtor to repaying creditors fairly while returning the debtor to productive economic life with a fresh start.

What changed in practice

The new law streamlined the process, created a faster track for smaller debts through the Enforcement and Collection Authority, strengthened the role of the Commissioner of Insolvency, and made discharge a structured, time-bound goal rather than an uncertain hope. The language also changed — from “bankruptcy” to “insolvency and economic rehabilitation.”

Does the old term still matter?

In everyday speech, people still say bankruptcy, and that is fine. Legally, what governs your case today is the 2018 Law. If your matter began long ago there can be transitional questions, which is exactly where tailored legal advice matters.

Frequently asked questions

Is “bankruptcy” the same as “insolvency” now?

In ordinary speech, yes. Legally, personal debt relief today runs under the Insolvency and Economic Rehabilitation Law, 5778–2018, which replaced the old Bankruptcy Ordinance.

Is the new process better for debtors?

Generally it is more rehabilitation-focused and time-bound, with a clearer route to discharge and a faster track for smaller debts.

Official sources

Have a question about your situation?

Don’t stay in doubt — reach out for personal, professional and confidential guidance in Afula and across Israel.

Message on WhatsAppCall: +972-4-6790330