A person gave his friend a loan of ILS 320,000, with a promise from the friend that he would invest the money in transactions with the Ministry of Defense, which was expected to yield about 10-12.5%. The friend eventually went into bankruptcy proceedings, in which he did not declare the abovementioned loan, but when he got an exemption, contended to be exempt from repaying the loan.
The Court held that the exemption did not apply to the debt. An exemption at the end of bankruptcy proceedings discharges the debtor from all obligations, but a bankrupt debtor must declare all his creditors. A publication in the official gazette is not sufficient, and personal notifications must be sent to each of the creditors. A debtor who knows about a debt and does not declare it acts in bad faith and this leads to a result according to which the creditor is excluded from the exemption.