During the course of an appeal concerning the realization by a creditor of a security interest in real property at a time when the debtor was in the midst of an insolvency proceeding, the Israeli Supreme Court reviewed certain principles regarding the realization of secured assets. The Court held that although in general a secured creditor may act independently of other creditors and outside of any parallel insolvency proceedings involving the debtor, in certain situations the interests of these other creditors must be considered.

The Supreme Court reviewed a distinction developed over the years in the lower instance District Court decisions. According to this line of cases, the Court recognizes that when a debt owed to a secured creditor exceeds the value of the secured asset, that the creditor's interest lies in maximizing proceeds received from the asset in order to repay as large a proportion of the debt as possible. In contrast, when the outstanding debt is less than the value of the secured asset, the Court recognizes the concern that it is often in a secured creditor's interest to realize the asset quickly, even at an undervalued price. This second scenario creates a conflict with the interests of the debtor's unsecured creditors in insolvency proceedings; it is to the unsecured creditor's advantage to maximize proceeds from the secured asset, even at the expense of a quick resolution.

The Supreme Court held that when the debt owed to a secured creditor exceeds the value of the asset value, due to common interests between creditors, a secured creditor can act independently and without interference, merely providing the Trustee or Liquidator with a report detailing the amount of debt, the value of the secured asset, and how the secured creditor intends on realizing the asset. In this scenario the Trustee or Liquidator is not involved with the actual realization of the asset. In contrast, when the value of the asset exceeds the debt, realization of the secured asset has to be under the supervision of the Trustee or Liquidator. Supervision should be proportionate, taking into consideration all relevant circumstances and balancing competing interests of secured and unsecured creditors.

In addition, the Supreme Court refined the District Court's line of analysis by making a further distinction: recognizing an additional category of cases in which a delay in the realization of the secured asset could result in increased complication and expense. The Court held that in this type of unusual situation, such as in the case at hand, the Trustee or Liquidator should have special authority to actually manage and realize the secured asset, together with the secured party.

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