Court Terminates Musa Nabulsi’s Second Insolvency Proceeding

The Debts and the Parties to the Proceeding

The proceeding was opened on September 11, 2024, at Nabulsi’s request; the initial monthly payment was NIS 150, and beginning on January 10, 2025, it was NIS 600. The proceeding involved the Commissioner of Insolvency Proceedings in the Jerusalem District, trustee attorney Yossi Nir, and the Israel Tax Authority — the Customs and VAT Division. Debt claims totaling NIS 1,437,435 were approved, of which NIS 882,049 were general debts and NIS 555,386 were subordinated debts.

Why the VAT Debt Cannot Be Discharged

The VAT Division filed the largest debt claim, totaling NIS 1,003,095. It relates to offenses committed by Nabulsi through a company he owned: the sale of fictitious invoices totaling approximately NIS 2 million and the deduction of input tax based on fictitious invoices issued by third parties. The court determined that the debt was incurred through fraud and is therefore non-dischargeable under Section 175(a)(2) of the Insolvency and Economic Rehabilitation Law, 5778–2018. The parties also did not dispute that a debt of NIS 129,215 to the Center for the Collection of Fines and an income tax debt of NIS 69,224 are non-dischargeable.

Why the Court Terminated the Proceeding

The trustee and the Commissioner requested that the proceeding be terminated because debts totaling approximately NIS 1.2 million could not be discharged. Judge Ofer Yuval applied Section 286(a) of the Law and determined that a rehabilitation plan would not achieve the proceeding’s objectives: the debtor would remain insolvent, the creditors would not receive meaningful repayment, and economic rehabilitation would not be realized. The court also noted incomplete reports, doubts as to whether Nabulsi had fully utilized his earning capacity and regarding the information in his pay slips, as well as the absence of objective evidence supporting his account concerning rights in a residential apartment.

Consequences of the Decision

The proceeding was terminated before an economic rehabilitation order was issued. After payment of the trustee’s fees, expenses, and supervision fee, the remaining funds in the creditors’ fund will be transferred to the Enforcement and Collection Office. Cancellation of the order commencing proceedings was deferred for 30 days to allow the restrictions and attachments that had been canceled to be reimposed; in addition, Nabulsi will be barred from filing a new insolvency application for 18 months.

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