Financial Devastation: A True Story
Mr. and Mrs. Smith, in their late forties, made Aliyah in 2007 with their two children, ages 13 and 15. They moved to a small community (yishuv) in the Samaria area in a rented house and for a short period were satisfied with their life in Israel.
Mr. Smith started a new business and soon the family had almost the same economic level they used to have in the US before they made Aliyah. They bought a small and modest car.
The family had some savings they used to make Aliyah and the rest Mr. Smith used to set up his new business. He and Mrs. Smith together made a nice income. They were both self-employed in addition to a part time job Mrs. Smith took as an English teacher.
Two months after opening the new business, they hired a CPA who helped them to navigate their first steps in Israel as self-employed. They learned about the National Insurance, VAT, taxes etc.
Business was not so great but somehow they were making a good living. They took a loan for the car, plus another loan to help the children purchase new furniture. Soon they had to take a third loan to cover their expenses – they were living beyond what their earnings.
The couple became very worried, they knew something was really wrong but instead of trying to find real solutions, they did what most people do: Nothing. They were hoping for better days and were still spending the same and using the credit line they had on their credit cards.
They made their biggest mistake when they decided to stop paying VAT – now they had committed a criminal offence in addition to tax evasion. They also stopped paying the National Insurance. All they could do now was to try to find a miraculous solution. It never occurred to them they needed to make a drastic change in spending.
They finally went to the bank and took a big loan to pay their debts, only to find out it was not enough. They did not know how to approach the tax authorities and were now in a panic. It never occurred to them to seek legal advice.
Then, in the middle of the night, the bank had their car towed (the same bank that gave them the loan to purchase the car). This is possible and very easy to be done by banks especially because when one buys a car in Israel with a loan from the bank, the car belongs to the bank until the loan is totally paid off.
Mr. Smith gave up and left the country leaving behind one daughter and his wife. They were supposed to join him in a few days but Mrs. Smith didn’t know that an exit ban had been placed on her – she found out at the airport when she was prevented from leaving the country.
The first question Mrs. Smith asked was: Can I use my American passport to leave the country? Can’t I just go? Unfortunately the answer is no. A citizen must use the passport of the country he is now living in to exit and enter.
For example: An American who is an Israeli as well can leave Israel using only his Israeli passport but when he arrives on US soil he must enter using his American passport. If you are an Israeli citizen please be advised that entering or exiting Israel with another passport rather than your Israeli one is a criminal act.
When Mrs. Smith came to seek legal help she had no money, was alone in Israel because her daughter left that same day (the prohibition order was only on Mrs. Smith), and she was in great despair.
It is impossible to negotiate a lesser settlement with the VAT. The National Insurance and taxes will negotiate to some extent but will not forgo the debt.
It has been six months since Mrs. Smith asked for legal help. She is working full time in two jobs and Mr. Smith is sending some money with friends but it will take at least two to three years until she can repay the debt and leave. Mr. Smith can enter Israel but because now there is an exit ban on him, he will not be allowed to leave the country. So he has made the decision not to try to enter Israel.
There are no concessions to be made; they will have to pay some of the debts before they can see each other. Mrs. Smith’s situation is very bad; in addition to the emotional side of not seeing her children and husband, she is living with minimal conditions.
They made every possible mistake: they were given bad advice from the CPA and friends who somehow “calmed” them down every time they were worried about their future. But these friends were not there when the couple needed a helping hand.
It is impossible to say if they will be able to come to Israel again, most likely not. Mrs. Smith knows they will never pay off all the debts that are now growing rapidly in the “HOTSA’A LA FOAL”. All she wants now is to pay the debts linked to the exit ban on her, hoping none of their creditors will ask for a new ban. If this does happen she may find it impossible to ever leave Israel and rejoin her family.
The only solution is to find friends and family in the US to lend them a large amount of money and to try to negotiate with all the creditors to repay as little as possible. They will need now twice the original amount they owed – more than 100 thousand dollars!
This is one case among several we handled in 2010 and we already have a new one for 2011. These are not stories but are about real people and real families; good people making the same mistakes again and again.
If you are losing a grip on your debts and cannot handle the finances any more, stop right now and look for help before is too late.
