The volume of international trade particularly between Israel and the rest of the world is on the rise, and international financial transactions have become more accessible than ever. Unfortunately, the ease and convenience of the global marketplace also increases the possibility of debt formation. The “rolling credit” culture both in Israel and in overall global supply chains also adds to this phenomenon.ย
International debts are difficult to avoid, and they are a major concern for business owners and companies, especially when large sums of money are involved. There are many reasons why customers accumulate debt. While some may be trying to avoid payment altogether, others may be dissatisfied with the product or service, causing an indefinite delay in payment.ย In other cases, customers may forget to pay the invoice on time, which leads to cash flow problems.
It can be quite daunting for managers and business owners to handle debt collection processes, especially when it comes to navigating a foreign legal system, dealing with language and cultural differences, and accounting for the sheer physical distance between creditors and debtors. For the process to be as smooth as possible, it is important to be aware of some common hurdles in international debt collection and how they can be overcome.ย
Some advice on common hurdles
Attorney Eyal Reifer, a founding partner at Deri Reifer & Co. , specializes in debt collection in Israel and abroad. He is well versed with the complexities of international debt collection and some common challenges faced by Israelis, and he sheds light on this important issue:ย
“In Israel, individuals and business owners come across many difficulties when having to collect debts from foreign countries. This is largely due to the uncertainty of the entire process – from the moment the debt is discovered to the implementation of the legal procedure – they are unaware of how to collect them and the most effective procedure to do so.”
Attorey Reifer also explains that due to the unavoidable complications and uncertainties of international collection proceedings, many creditors give up before they even start:ย
“โฆ in several cases, Israeli business owners decide to waive the debt, despite it being a relatively large sum of money – because they don’t always have the knowledge or, rather, the capacity to deal with the lawsuit. Go ahead and try to understand the laws of debt collection in foreign countries, and how their legal system works and you will find that the uncertainty is indeed very real.”
He goes on to explain where Israelis, specifically, experience the most difficulty:ย
“One of the most prominent problems encountered in the collection of international debts is finding the right collection company and the right lawyer to manage the collection process and to collect the debt from the foreign country. Many Israelis are under the false notion that any lawyer can carry out debt collection tasks, despite it being an international one. A lawyer who is not experienced in debt collection and in particular international debt collection, will likely do more harm than good. Therefore, it is of utmost importance to choose a lawyer with expertise and experience in this field as this would make the process much easier. “
According to Attorney Reifer, another common problem is the differences in the costs of legal procedures in that foreign country. Costs can add up dramatically, especially when dealing with large sums of money.ย
Regarding cultural differences, he notes:
ย “Cultural and language differences are often reflected in the countryโs legal system. This adds another layer of complexity in collecting international debt. In many cases, the legal system of the foreign country is misunderstood, making it more time consuming and expensive to navigate the debt collection procedures. Without a doubt, the collection of international debts is a difficult and complex task that must be dealt with cautiously and professionally.”
Despite the obstacles and challenges, there are legal protocols and systems in place to collect international debts. Attorney Reifer explains some of the steps:ย
“In order to collect a debt from foreign countries, various methods can be adopted. One of the ways to do so โ if the debtor is Israeli – is to return the debtor to Israel in order to collect the debt.”
“It is also possible to collect the debt in the foreign country where the debtor lives. In this case, first locate the debtor’s physical location, after that, take legal action against the debtor according to the procedures laid down by the legal system of that country.”ย
Can Israeli judgments be enforced in foreign countries?ย
First and foremost, it is important to carefully examine the legal system of the country in question. Though the principles of law may be similar, judicial methods tend to differ from country to country. As of 2023, most foreign countries have courts that can enforce Israeli judgments. Also, most foreign countries have enforcement systems in place that work to acquire various assets for debt relief.
Collecting a debt from a country that has signed a mutual international treaty with Israel is simpler than with a country that has not. There are various countries around the world that recognize Israel as a country with fair legal procedures and a strong and sound legal system. Israel, in turn, recognizes those countries as having fair legal procedures and a strong and sound legal system. Following this recognition, agreements were made based on a mutual respect for each otherโs legal systems.
Attorney Reifer explains what happens when debt collection involves countries that donโt recognize Israel and are not signatories to an international treaty with Israel:ย
“When a debt has to be collected from a country that has no international treaty with the State of Israel, the collection process becomes more complex and difficult since each has its own lawsโฆ. While certain countries can decide to recognize the judgment, others can decide not to recognize it. So, in order to check the chances of gaining recognition of a judgment in a certain country, one needs to refer to the law concerning the enforcement of judgments of foreign countries in Israel. “
This law states that the judicial system in Israel has the authority to declare foreign judgments as ‘enforceable’ under the following conditions:
- It is not possible to file an appeal against the same verdict.
- There is a possibility of enforcing the judgment in the same foreign country where it was received.
- The judgment which was received in the foreign country does not contradict its public regulations.
- According to the legal system of the foreign country where the judgment was received, the court that issued the judgment has the permission to do so.
All of the above conditions are also conditions Israel has made with other countries. For further details into each condition and its implications, it is recommended to get the support of a lawyer or a law firm specializing in the basics of international private/business law.ย
International debt collection in the American context
Given the strong ties between Israel and the US, it is also important to address how debt collection works there. According to American law, one need not be a lawyer to engage in debt collection. This means that anyone can engage themselves in a debt collection case, which obscures international debt collection cases even further. If this happens, an experienced debt collection lawyer should be able to guide you through the necessary steps.ย ย
Authorities in the US work towards protecting debtors living in the country from various collection companies that can, at times, operate in unpleasant and aggressive ways to collect debts. For instance, there have been cases where debtors have been unreasonably threatened while having information withheld from them.
For this reason, among others, the Fair Debt Collection Practices Act was established. Now, debt collection in the United States must proceed in accordance with the provisions of this law.
The most prominent goals of the Fair Debt Collection Practices Act are:
- Ensure that the collection procedure is conducted in a proper and fair manner.
- Ensure that during debt collection, no offensive activity will be carried out.
- Allow debtors to receive full information regarding their obligations, while ensuring the reliability of this information.
Furthermore, the Fair Debt Collection Practices Act works to regulate other issues, such as the ways in which the debt collector can act to collect the debts, the ways in which the debtor can act to protect himself and finally, it also regulates the penalties received in cases of breaking the law.
When someone from a foreign country engages the services of a collection company, it is crucial to ensure that the company has a good track record of operating in accordance with the law. Otherwise, it can harm the debt collection process. So, it is important that the Israeli attorneys you hire not only have sound proficiency and expertise in American law pertaining to international debt collection, but that they are also equipped to navigate debt collection processes through collection companies.ย
The law firm Deri Reifer & Co. specializes in international debt collection in Israel and abroad and can provide interested clients with an initial examination of their debt and possible courses of action.ย
For details, contact 050-7118585 or get in touch through the firmโs website.
*Clarification: The above is intended for general information only and is not to be used as a substitute for legal advice/guidance. Under no circumstances should this be seen as a recommendation to choose procedures or to avoid procedures. Anyone who makes a decision according to this article does so at their own discretion and responsibility.
