What to do if the debtor gets rid of his property before execution? – An actio pauliana claim

Anna Miśtal-Kluś        02 October 2017        Komentarze (0)

A final and valid judgment stating that a debtor has to pay to the creditor a given amount of money is not yet a full success. What you need as a creditor is to have a possibility to execute the judgment effectively. If the debtor does not pay the adjudged amount voluntarily, you need to know if he owes any property which will be sufficient to satisfy your claims. It might happen that the debtor, knowing that he will be obliged to perform the court judgment, removes his property from his estate. A quite common situation is that a debtor sells out or gives away e.g. his real estate being the only component of significant value within his property, which makes it impossible for the creditor to receive his money. A Polish Civil Code (CC) provides a certain protection fot creditors being in such situation.

According to Art. 527 § 1 CC if, as a result of a legal act performed by a debtor to the detriment of creditors, a third party gains a financial benefit, each of the creditors may demand that the said act is  declared ineffective with respect to him, if the debtor acted knowingly to the creditors’ detriment, and the third party knew or, having used due care, could have learned of it. Art. 527 § 2 CC provides that a debtor’s legal act is performed to the creditors’ detriment if, as a result of such act, the debtor becomes insolvent or becomes insolvent to a greater degree than he was before performing the act.

 

A legal suit – an actio pauliana claim

This regulation means that the creditor has to file a legal suit to the court against the third party (an action pauliana claim) and he needs to prove the above mentioned circumstances. However, the third party may indicate existing property of the debtor that would be sufficient to satisfy the creditor’s claim and in this way may prevent declaring the legal act to be ineffective. The situation of the creditor in such legal proceedings is easier if one or more of the following circumstances provided by Art. 527 – 529 CC occur:

– if the third party is in a close relationship with the debtor, it is presumed that such person knew that the debtor had acted knowingly to the creditors’ detriment,

– If, as a result of a debtor’s legal act performed to the creditors’ detriment, a financial benefit is gained by an entrepreneur having permanent economic relations with the debtor, it is presumed that he knew that the debtor had acted knowingly to the creditors’ detriment,

– If, as a result of a debtor’s legal act performed to the creditors’ detriment, a third party gains a financial benefit free of charge, the creditor may demand that the act is deemed ineffective even though the person did not know and, having used due care, could not have learned that the debtor had acted knowingly to the creditors’ detriment,

– If, at the time of a donation, a debtor is insolvent, it is presumed that he is acting knowingly to the creditors’ detriment. The same applies where a debtor becomes insolvent by making the donation.

 

Further disposal of the benefit

What happens if the third party disposes of the benefit gained to the next person? Then the creditor may directly sue the person to whom the disposition was made (i.e. “the fourth person”) if that person knew of circumstances justifying the debtor’s act being declared ineffective or if the disposition was free of charge (Art. 530 CC).

 

Deadline for an actio pauliana claim

What is to be remembered? You may demand for a legal act to be declared ineffective only within five years from the date of the act.

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