On November 4, 2008, the Knesset voted for a comprehensive reform in the Execution Law, a law governing relations between banks and debtors as well as several important elements of mortgage contracts.
The Justice Ministry had initiated the reform mainly to improve authorities’ collection capability. Therefore most of its efforts went into capitalizing on the opportunity to create better balances between debtors and creditors.
This reform, which has been discussed for months, includes a new array of tools which can be used against debtors, some of which constitute severe invasions of privacy. However, the reform also contains no small measure of new benefits for debtors. Overall, it creates a better balance between the rights of creditors and the rights of debtors.
There two main gains achieved in terms of human rights through the reform are:
Alternative housing – Clause 38 was amended so that a borrower who cannot meet their mortgage payments will be entitled to alternative housing, thus preventing hundreds of families from being left homeless if evicted. The possibility of waiving the option of alternative housing in mortgage contracts was rescinded and thus the provision became mandatory. In addition, an eviction order will not be granted except after a hearing in the presence of both parties. Alternative housing will be provided for a period of up to 18 months in the area where the family originally lived, meaning easier access to places of unemployment, children’s schools, etc. In exceptional cases, it will be possible to extend the period. As for existing contracts – the amendment will be enforced if it is found that the debtor’s right to alternative housing and the significance of the waiver was not made clear to them.
Imprisonment of debtors – The option of using imprisonment as a tool for collecting debts was greatly curtailed and imprisonment is now the last resort, and in such cases only for debts of more than NIS 2,000. In two years from now, the imprisonment of debtors will be cancelled completely for a trial period of two years.
Additional amendments:
A collection fast track was introduced dispensing of the need for a lawyer and professional fees, for debts not exceeding NIS 10,000 (apart from alimony payments or mortgage enforcement).
The option was given to restrict the debtor from holding or renewing a driving license (unless it is necessary for their livelihood or due to disability).
Execution Office registrars now possess access to data banks to collect information on debtors’ financial means.
Medical equipment and medications cannot be confiscated.
Money due to a debtor from the Housing Ministry as a housing grant toward rent may not be confiscated.
ACRI Attorney Gil Gan-Mor, who worked with a range of human rights and social organizations to ensure the protection of mortgage debtors’ rights, welcomed the reform in the Execution Law and noted that despite the concessions made, it provides a better balance between the rights of the banks and the rights of borrowers:
“Despite pressures by the banks, Members of Knesset stood their ground and amended the historic distortion that enabled the banks to evict mortgage debtors from their homes easily and without any restrictions and contrary to the intention of the law’s original legislator,” Gan-Mor said. “Some 1,500 families are evicted by the banks from their homes every year. The amendment that was passed in the Knesset will force the banks to give evicted mortgage debtors alternative housing for the period after the eviction so as to prevent the potential violation of their right to adequate shelter and their right to live in dignity.”
