Background
Marek Mizrahi is a debtor in bankruptcy proceedings before the Tel Aviv-Jaffa District Court (case no. פש”ר 18259-08-16). On July 15, 2025, the district court approved the sale of all of Mizrahi’s rights in a property to Respondent 2, Abraham Mahagrafta, under the terms of a sale agreement. The sale was administered by Respondent 1, Yakir Neydik, acting as the special administrator (trustee) of the bankruptcy estate.
On March 18, 2026, the district court (Judge Y. Eliyahu) rejected Mizrahi’s application for reconsideration of the July 2025 approval. Mizrahi then filed a petition for leave to appeal that ruling at the Supreme Court. As a threshold procedural matter, he sought either a full exemption from the security deposit required under Israeli civil procedure rules, or alternatively a reduction of the deposit or permission to pay it in installments.
Both Respondent 1 (the trustee) and Respondent 2 (the purchaser) opposed the application, arguing that Mizrahi had not established a proper factual and evidentiary basis for his claimed financial inability, that his simultaneous request in the leave-to-appeal petition to redeem the property at the sale price contradicted his claimed poverty, that he had acted in bad faith, and that his prospects of success on appeal were low. Both respondents also requested that Mizrahi be ordered to pay their costs.
The Court’s Holding
Registrar Moran Yahav denied the application in full. As a preliminary matter, the court corrected a factual error in Mizrahi’s own application: the required security deposit in a leave-to-appeal proceeding arising out of bankruptcy is 3,000 NIS — not 20,000 NIS — pursuant to Item 10 of the Third Schedule to the Civil Procedure Regulations, 5779–2018. That lower figure already reflects the legislature’s recognition of a debtor’s presumed financial difficulty.
The court reaffirmed the two-part cumulative test governing exemption or reduction of a security deposit: (1) the applicant must prove financial inability through a full, detailed, and current factual and evidentiary record; and (2) the applicant must demonstrate sufficient (for a fee exemption) or substantial (for a security exemption) prospects of success on the merits. In addition, an applicant must show that he cannot raise the required sum through assistance from his close circle. Citing Civil Appeal 58976-06-25 Grummet v. Mishan (July 13, 2025) and Leave to Appeal 19680-07-25 Pinchas v. the Supervisor of Insolvency Proceedings (November 3, 2025), the court held that the mere fact of being a debtor in bankruptcy does not, by itself, discharge the obligation to place a proper evidentiary foundation before the court.
Mizrahi’s application was found to be deficient on the evidentiary prong. Beyond a bare affidavit, it lacked bank statements, a detailed breakdown of monthly expenses, any explanation of how his ongoing legal representation was being funded, and any consideration of whether family members or close associates could assist in raising the 3,000 NIS deposit. Because the reduced statutory amount already accounts for the debtor’s presumed hardship, further reduction or full exemption required a more thorough showing — which Mizrahi failed to provide. The court therefore ordered him to deposit 3,000 NIS by June 17, 2026, warning that failure to comply could result in dismissal of the leave-to-appeal petition without further decision. The respondents’ request for a costs award was denied, consistent with the Supreme Court’s established practice of not imposing costs in security-exemption proceedings.
Key Takeaways
- Bankruptcy status is not a standalone basis for exemption from a security deposit in appellate proceedings; the applicant must still furnish a complete, current, and documented picture of his financial position.
- Under Item 10 of the Third Schedule to the Civil Procedure Regulations, 5779–2018, leave-to-appeal petitions filed by debtors in bankruptcy carry a reduced security of 3,000 NIS — a legislative concession that itself embodies the assumed hardship, making further reduction difficult to obtain without rigorous evidence.
- A bare affidavit without supporting bank statements, itemized expenses, explanation of legal-fee funding, and a showing that close associates cannot assist will not satisfy the financial-inability prong of the two-part test.
- The Supreme Court does not, as a matter of practice, award costs against applicants in security-exemption proceedings, even where the application is unsuccessful.
Why It Matters
This decision reinforces the evidentiary discipline Israeli courts require before waiving or reducing procedural financial obligations, even for litigants in the most vulnerable financial circumstances. By emphasizing that the legislature has already made a policy accommodation for bankrupt debtors through the reduced 3,000 NIS security threshold, the court signals that further judicial relief requires genuine documentation — not merely a declaration of insolvency. Practitioners representing debtors in bankruptcy who wish to pursue appeals should ensure they compile bank records, expense schedules, and evidence of exhausted alternatives before filing an exemption application.
The ruling also provides useful procedural clarification for insolvency litigators: the operative security figure for bankruptcy-related leave-to-appeal petitions is the specific amount set in Item 10 of the Third Schedule to the 2018 Regulations, and courts will correct applications that cite the higher general-civil-proceedings figure. Read alongside the cited decisions in Grummet and Pinchas, this ruling forms part of an emerging line of Supreme Court registrar-level authority standardizing the treatment of security-exemption requests in insolvency appellate practice.