As part of a financing agreement the lender received a pledge over an apartment of the debtor. The debtor enters bankruptcy proceeding and the lender filed a debt-claim to the appointed bankruptcy receiver, which was approved in part by the receiver, but did not get the money because the bankruptcy estate did not have sufficient funds. After about three years the debtor was discharged of all debts but the lender refused to lift the pledge and claimed, among other things, that it renewed the pledge during the bankruptcy proceedings to retain its rights.
The Court held that the request to remove the pledge is part of the bankruptcy proceedings. A secured creditor may realize its security by itself instead of entering it into the bankruptcy estate and receiving the funds through the bankruptcy procedures. A secured creditor cannot "sleep on its rights" and avoid or delay the realization of the security, especially when it filed a debt-claim to the receiver. In any case, once the debtor was discharged from all obligations the debts is cancelled and so is the pledge that was to guarantee such debt. The renewal of the pledge registration has no meaning because the debtor was in bankruptcy proceedings at the time and the creditor did not receive the approved of the receiver for the renewal.
For the sake of full disclosure, the office of Afik & Co. represented the debtor in this case.