What should be done if the debtor sells assets in order to hide?


Often, while the court proceedings are still pending, the debtor sells the property in order to hide his property before enforcement. Most often, they sell at a reduced price or make donations to family and relatives, becoming insolvent themselves. However, creditors have an institution that protects them against such treatments, which is actio pauliana.

In Polish civil law, actio pauliana functions pursuant to Art. 527-534 of the Civil Code Pursuant to the provision of Art. 527 § 1 of the Civil Code, when as a result of a legal act of the debtor detrimental to creditors, a third party obtained a pecuniary advantage, each of the creditors may request that this act be considered ineffective in relation to him, if the debtor acted with the knowledge of detriment to the creditors and the third party knew about it or with due diligence, she could find out.

When is it possible to make use of an actio pauliana?

Thus, the premises of the actio pauliana are:

1) performance by the debtor with a third party in a legal transaction, under which the third party obtained a financial benefit and at the same time detrimental to the creditors,
2) the debtor's action with the awareness of the harm to the creditors,
3) knowledge or the possibility (with due diligence) to find out about it by a third party.

These conditions must be met cumulatively. A legal act detrimental to creditors occurs when, as a result of this act, the debtor has become insolvent or has become insolvent to a greater extent than he was before the act.

To accept that a third party has obtained a financial advantage, it must be shown that, on the basis of a legal action of the debtor, it acquired an item or right or was released from the obligation, which resulted in a change in the debtor's assets leading to detriment to creditors (judgment of the Supreme Court of 7 December 1999, no. , file reference number I CKN 287/98). The creditor's harm should be assessed within the appeal period, and not within the legal act (judgment of the Supreme Court of 22 March 2001, file reference number V CKN 280/00).

How to formulate a lawsuit on an actio pauliana?

In the petitum of actio pauliana one should demand that the act be considered ineffective in relation to the creditor. You cannot demand that the contract be declared invalid or the ineffectiveness of a legal action determined, moreover, it is obligatory to indicate in relation to whom the ineffectiveness is to be declared.

Of course, it is necessary to indicate which activity the request concerns. It may happen that a third party will dispose of the obtained benefit for the benefit of another person, etc. In this case, the action should be brought directly against that person, but only if the regulation was free of charge or the fourth person knew about the circumstances justifying declaring the legal act ineffective (Art.531 § 2 of the Civil Code). In the lawsuit, it is also worth applying for security, e.g. in the form of a prohibition on selling or encumbering items. If it concerns real estate, an application should be submitted for the entry of a warning in the land and mortgage register regarding the prohibition of selling and encumbering the real estate.

I got my sentence. What's next?

The judgment allowing the claim is constitutive in nature, and therefore cannot be given an enforcement clause. The creditor should submit two applications: an application for a declaration of the validity of the judgment to the extent that the debtor's legal act is ineffective, and an application for an enforcement clause in the scope of the costs of proceedings awarded to him. After obtaining the writ of execution, it is possible to conduct the enforcement proceedings.