Can Ningbo's marital AA agreement fight creditors?

Many couples, when they sign that agreement stating “each earns separately, each spends separately,” assume that from then on, debts will also be handled independently. It is only when creditors come knocking and the court freezes the accounts that one realizes: this agreement may work between the two parties, but it often amounts to nothing when faced with a third party. The problem does not lie in whether the agreement is well-drafted, but rather in a commonly overlooked evidentiary threshold: the Civil Code of the People's Republic of China places the onus of proving "exemption from liability to third parties" on the party asserting such exemption, rather than on the creditor.

1. Legal basis and formal requirements of the system of separate property for spouses

Article 1065 of the Civil Code stipulates that both men and women may agree that the property acquired during the existence of the marriage relationship and the pre-marital property shall be owned by themselves, jointly or partially owned by themselves and partially jointly owned by themselves; the agreement shall be in written form; if there is no agreement or the agreement is not clear, the legal common property system shall apply. What is commonly referred to as “splitting the bill” is legally termed the “agreed separate property system.” It constitutes a lawful alternative to the statutory community property regime, rather than a reflection of one’s emotional stance.

1. Written form is the minimum requirement for validity.

Verbal promises, a single sentence in WeChat saying “from now on, we’ll each mind our own business,” and an audio message in a family group chat are all difficult to be recognized as property agreements that meet the requirements for written form. Based on actual consultations in Ningbo, the proportion of agreements that are formally documented and signed by both parties is significantly lower than what the parties themselves report. A written agreement must include at least four elements: the scope and method of identifying the property, the allocation of ownership, the effective date, and the signatures and dates of both parties. Agreements that lack an effective date are often construed in disputes as applying only to property existing at the time of signing, with any income acquired thereafter still treated as community property.

2. Agreements may govern premarital property, but they cannot alter the marital status or personal relationship.

The agreed-upon scope is limited to property. Including identity-based and punitive clauses such as “divorce shall not be permitted” or “infidelity shall result in forfeiture of all marital property and the right to visitation” in a marital agreement generally renders those clauses unenforceable, while the provisions pertaining to property typically remain valid on their own. Combining two distinct types of content into a single provision actually increases the risk that the entire provision will be invalidated; it is recommended to set them out in separate articles and clauses.

2. Internal binding force and external enforceability are two different matters.

Article 1065, paragraph 2, of the Civil Code states clearly: any agreement between the parties shall be legally binding on both. This is for internal effect. The third paragraph sets forth the conditions for the external effect: if, during the subsistence of the marital relationship, the spouses agree that property acquired during that period shall be owned separately by each party, and a third party is aware of such agreement, any debt incurred by one spouse shall be discharged with the individual property of that spouse. In other words, the debt is only limited to the personal obligation of one spouse if the creditor “knew” about that agreement; if the creditor was unaware, the agreement will not be enforceable against the other spouse.

The burden of proof rests with one spouse.

Whoever asserts “the creditor knew” bears the burden of proof. This well-established principle of procedural law in practice virtually determines the outcome of the vast majority of cases. For one spouse to be exempt from joint and several liability, they must present evidence that the creditor was already aware of the separate property regime at the time the debt was incurred, rather than simply producing a post‑facto agreement or a subsequent notarized document. The later the agreement is signed and the closer the notarization is to the time when the dispute arises, the lower its credibility.

3. How can it be proven that "the other party was aware of the agreement"?

Valid evidence typically possesses two characteristics: it must have been created before or at the same time as the debt was incurred, and the creditor must have taken a clear action to receive it.

1. Four types of relatively strong evidence

First, the loan contract and the guarantee document directly state that "the lender has known that the borrower's husband and wife implement the separate property system, and the debt is the borrower's personal debt" and signed by the creditor; second, the written exchanges (e-mails, letters, and service vouchers with receipt records) in the debt negotiation stage are attached with the property agreement text; third, the creditor has long-term business dealings with the husband and wife, and the previous transaction has been settled according to the separate property system, and fourth, the property agreement has been notarized and presented to the creditor before the transaction, the notarization time is significantly earlier than the time of the debt.

2. Common but Essentially Ineffective “Evidence”

Statements made by one spouse, testimonies from relatives and friends, confirmation letters signed after the dispute has arisen, and statements posted solely on one’s personal WeChat Moments typically do not constitute sufficient evidence. In particular, be aware that handing the agreement to an agent, guarantor, or introducer does not constitute delivering it to the creditor in person.

4. How do joint debt and joint signature rules reduce the room for the AA system?

Article 1064 of the Civil Code establishes three ways to judge the joint debt of husband and wife: the first is the debt of the joint signature of both husband and wife or the subsequent ratification of one party; the second is the debt that one party bears for the daily needs of the family in his own name during the existence of the marriage relationship; the third is the debt that exceeds the daily needs of the family, the creditor can prove that the debt is used for the part of the husband and wife living together, joint production and operation, or based on the common intention of both parties.

1. The system of separate property cannot prevent the first and second pathways.

As long as the spouse has signed the loan agreement, or subsequently confirmed that “we will repay this debt,” the joint expression of intent is deemed established, and the issue of a separate property regime is no longer open for discussion. Similarly, debts incurred for the daily needs of the family—such as household consumption, children’s education, and routine medical care—are, even under a system of separate property, generally regarded in practice as being borne jointly by both spouses, given that the shared benefit derived from such debts is readily apparent.

2. The third path is the one that truly has room for development.

With respect to large-amount loans, business-related liabilities, and investment-related liabilities, the burden of proof lies with the creditor—the creditor must demonstrate that the funds were used for the couple’s common living expenses or for their joint production and business operations. Only under a system of separate property, coupled with clearly defined financial flows—where funds are deposited into one spouse’s separate account, used exclusively for that spouse’s sole proprietorship, and the joint family account receives no corresponding benefits—can an effective defense be established. This also explains why physical isolation of accounts is more important than the protocol text itself. The judgment in Ningbo area has the same grasp of this path: according to the judgment of Cixi Court (2018) Zhejiang 0282 Minchu No. 7747 and Ningbo Intermediate People's Court (2019) Zhejiang 02 Minzong No. 1524, the creditor must prove that the loan exceeding the daily needs of the family is used for the husband and wife to live together, produce and operate together or express their intention together, otherwise it will not be recognized as the husband and wife's joint debt.

5. Why awarding all the property to one party during divorce may be revoked.

Another common misconception is treating a divorce agreement as a means to evade debt: the indebted party initiates divorce proceedings during litigation, agreeing to transfer all joint marital property to the other spouse and leaving themselves with nothing, in an attempt to frustrate the creditor’s enforcement efforts. This avenue has been largely closed off at the referee level.

1. Elements of the creditor’s right of rescission

Article 538 of the Civil Code provides that if a debtor disposes of its property rights gratuitously by waiving its claims, relinquishing security for its claims, transferring property without consideration, or through other similar means, thereby impairing the realization of the creditor’s rights, the creditor may request the people’s court to revoke the debtor’s actions. Although the provisions in a divorce agreement concerning property division are inherently tied to the parties’ personal relationship, any gratuitous disposition that conspicuously deviates from a reasonable apportionment and renders the debtor incapable of satisfying their debts may nonetheless be subject to avoidance.

2. The exercise period cannot be extended.

Article 541 of the Civil Code provides that the right of revocation shall be exercised within one year from the date when the creditor knows or ought to know of the grounds for revocation; if such right is not exercised within five years from the date on which the debtor’s act was performed, the right of revocation shall lapse. For creditors, if they discover that the other party has suddenly divorced and transferred assets during litigation, they should promptly document the date of the registration change and the terms of the agreement to avoid missing any deadlines.

6. Case verification

In practice, after one party is sued in connection with a business dispute, they enter into a divorce agreement with their spouse, under which all marital property acquired during the marriage is assigned to the other party. Subsequently, the creditor brings suit seeking to rescind that provision regarding the division of property. The court usually examines three facts: whether the division of property deviates significantly from the normal proportion of the half-division, whether the debtor is insolvent after the division, and the time correlation between the division and the litigation node. When all three criteria indicate an irregularity, the gratuitous disposition exceeding the reasonable share shall be revoked, and the revoked portion shall revert to the scope of enforceable assets. The review of such cases by the courts of Ningbo and Zhejiang is consistent with this. According to the "case statement" of Ningbo Intermediate People's Court, "Divorced, How to Calculate the" Account "?" (2014-08-05), the debt agreement in the divorce agreement is invalid for the third party, but the husband and wife can recover afterwards.

In practice, when a married couple has entered into a written agreement on the separate property regime and one spouse incurs a substantial debt to a third party, if the other spouse claims not to be jointly liable for repayment, the court generally requires that spouse to provide evidence that the creditor was aware of the agreement at the time the loan was made. If only the agreement text and a post-facto notarized certificate are submitted, without proof that the creditor received the relevant information, such defense is generally not accepted. However, if it can be demonstrated that the creditor signed the loan contract and acknowledged the relevant clauses, the debt is more likely to be deemed an individual obligation, to be repaid from the debtor’s personal assets. Ningbo Court's grasp of this rule of proof has confirmed the case: according to the judgment of Cixi Court (2018) Zhejiang 0282 Minchu No. 7747 and Ningbo Intermediate People's Court (2019) Zhejiang 02 Minzong No. 1524, loans exceeding the daily needs of the family and creditors failing to prove that they are used for the joint life, joint production and operation or joint expression of intention of husband and wife are not recognized as joint debts of husband and wife.

7. Risk Warning

• Agreement signed but no separate accounts: Income continues to be commingled into the same bank account, making it difficult afterward to reconstruct the factual state of “each party’s assets,” and written agreements can easily be rendered ineffective.
• Retroactive and Subsequent Signing: Executing a property agreement after the debt has arisen and backdating it not only fails to provide liability exemption but may also lead to the complete invalidation of the agreement’s authenticity.
• Disregarding Ratification: Answering collection calls on behalf of the other party, participating in repayment negotiations, or submitting a repayment plan may all be deemed as subsequent ratification, thereby directly triggering joint and several liability.
• Mixing personal status clauses with property-related clauses: Provisions such as “leaving with nothing” and restrictions on divorce are not enforceable; it is recommended to separate these into distinct clauses from the property agreement.
• Loss of the right of rescission due to lapse of the limitation period: The one-year prescriptive period for creditors begins to run from the date they knew or should have known of the grounds for rescission; prolonged inaction and waiting often result in the extinction of the right.

8. Frequently Asked Questions

Does a marital property agreement under the “AA system” need to be notarized to be valid?

No need. Article 1,065 of the Civil Code only requires that the agreement be in writing; notarization is not a condition for its validity. The value of notarization lies in establishing the date of signing and verifying authenticity, making it more persuasive when proving to a creditor that an agreement was entered into prior to the debt. However, notarization alone does not automatically render the agreement enforceable against third parties.

If a loan was taken out without the spouse’s signature, does an “AA system” (where each person is responsible for their own debts) automatically mean it doesn’t have to be repaid?

Not necessarily. It is necessary to distinguish the types of debts: debts that belong to the daily needs of the family usually still need to be borne together; The separate property system does not produce exemption effect for debts signed jointly or ratified afterwards. Only debts that exceed the daily needs of the family and are not used for common life, production and operation can be paid off by the personal property of the debtor party only if it can prove that the creditor knows the agreement.

How can it be determined that a creditor “knew” about the agreement on the separate property regime?

The key is the existence of written evidence that was created before or at the time the debt arose and bears traces of having been received by the creditor. More persuasive forms of evidence include: express acknowledgment clauses contained in loan or guarantee documents signed by the creditor; delivery of a letter with a signed receipt; and records demonstrating that prior transactions were settled under a separate property regime. Subsequently submitted statements and unilateral declarations are generally not admissible.

If a divorce agreement stipulates that the property belongs to the other party, can creditors still enforce execution against it?

You can give it a try. If the division clearly exceeds the reasonable share, constitutes a gratuitous disposition and affects the realization of the claim, the creditor may request the revocation of the part of the agreement in accordance with Article 538 of the Civil Code, and the corresponding share of the property shall be re-included in the enforceable scope after the revocation. The right of rescission must be exercised within one year from the date when the party knew or ought to have known of the grounds for rescission.

9. Practical Insights from a Lawyer

Couples who sign an agreement stating “each earns, each spends” can keep each other in check, but it may not hold up in dealings with third parties—this is where many families really end up at a disadvantage. For the system of separate property to take effect in external relations, it is a prerequisite that the third party be aware of this agreement; and the burden of proving “that the other party was aware at the time” is borne by the party asserting exemption from liability, not by the creditor. In other words, a written agreement kept solely between the two parties and filed away in a drawer often fails to provide any protective effect when creditors come calling.

To establish a strong position in external proceedings, you must be able to demonstrate that the creditor was aware at the time of the loan: relevant statements in the loan agreement, records in the parties’ communications mentioning the agreed terms, and verifiable evidence of notification or public disclosure all point in the right direction. At the same time, whether the other party signed the foreign debt agreement, or whether they subsequently ratified it, and whether the debt was used and benefited from jointly by both parties, often becomes the key factor in making a determination. Therefore, rather than going to great lengths to prove it afterward, it is better to inform the relevant parties of the agreed terms and leave a record before the loan takes place.

There are two more common pitfalls: First, giving almost all the marital property to one spouse during divorce in order to evade debts—such arrangements may be challenged for revocation or deemed to have harmed the creditors’ interests. Second, treating a marital property agreement as an all‑powerful shield while overlooking the requirement that third parties must be informed. During the negotiation, if the other party uses "this is my own debt, it has nothing to do with me" to get out, first distinguish whether the money is a personal debt or a common debt, and then decide whether to make concessions on the division of property, don't be confused for the other party to carry the debt, and don't count the debt that should have been borne by the other party on your own.