(JNi.media) A new “Shmita Law,” releasing more than 20 thousand Israelis who are too poor to meet their debt obligations, has passed on Tuesday in the Knesset Constitution, Law and Justice committee and is on its way to a House vote.
Every seven years, according to Torah law, on the year of Shmita (Heb: to drop), all financial debts are forgiven. The rabbis, seeing that a literal application of this law would bring the market to a halt, devised means of forcing debtors to pay up, but the principle by which people down on their luck get an opportunity to start over is important. Important enough to be on its way to becoming a law in Israel, and how fitting it is that the legislation will take place during 5775, which happens to be a Shmita year.
At the end of a long discussion Tuesday, the Knesset Constitution, Law and Justice committee, headed by MK Nissan Slomiansky (Bayit Yehudi) unanimously passed the “Shmita Law” which erases the debts registered with the Execution Office against thousands of Israelis with limited means, when there is no chance that they would return the debts to their creditors, Kalkalist reported.
The committee decided to apply the new law to those who have been defined as limited over the past four years, rather than over five years as stipulated in the original government bill, a change that increases the number of potential beneficiaries to 22 thousand.
The committee’s decision was unanimous.
The law was initiated in the current Knesset by Justice Minister Ayelet Shaked (Bayit Yehudi), and has been merged with a bill offered by MK Merav Michaeli (Labor). According to the new law, debt write-offs will apply over the next three years to debtors whose overall outstanding debt is less than $210 thousand, and who do not owe more than $105 thousand to any single creditor, and they have complied with their assigned debt repayments for the previous three years.
In the current situation, borrowers who are unable to repay their debts can declare bankruptcy. But many debtors who come from disadvantaged population groups shy away from the bureaucratic complications involved. Instead, they submit to an examination of their financial ability by the Execution Office Registrar, who assigns them lower monthly payments according to their income.
But that level of payment is not enough to return the debt, and sometimes not even the interest, while in the meantime the debtor can’t use credit cards, open a bank account, establish a business or leave the country.
“About 22 thousand people, who have been living under the shadow of multiple debts and exorbitant interest rates can breathe a sigh of relief,” said Minister Shaked. “I congratulate the Constitution Committee, which approved the bill and contributed to a welcome change in Israel’s society and economy.”
According to estimates provided by the Justice Ministry in the past, the average debt of a person who is entitled to debt forgiveness is $65 thousand. Most of the debts are owed to institutions such as banks, government agencies and commercial companies.
Creditors are entitled to appeal to the Execution Office Registrar regarding debt erasure decisions.