Ningbo to hide the debt to give away the property, creditors can recover it?- Zhiheng Law Firm

Before incurring debt, some individuals transfer ownership of their house to their son; after taking on the debt, they promptly sign a prenuptial agreement with their spouse stipulating that they will receive nothing upon divorce, or even sell their car to a cousin at 30% of its value—such scenarios repeatedly arise in enforcement cases. The creditor, armed with a final and enforceable judgment, went to the debtor’s residence only to find that the debtor no longer possessed any assets available for enforcement. Can the money be recovered? The law’s answer is: it can be recovered, but it depends on the type of asset transfer involved. It is also "giving away property". Some can be revoked by a court decision and the property returned to the original road, while others can only watch the gift land safely. The distinction does not lie in luck, but rather in several specific elements: whether the transfer occurred before or after the debt was incurred, whether the transferee acquired the asset for consideration or without payment, whether the debtor still has any assets remaining, and whether the creditor can bring suit within the statutory time limit.

1. The law has given creditors two "weapons": rescission or invalidation.

When a debtor disposes of assets to evade debt, the law provides creditors with two avenues: the creditor’s right of rescission and the doctrine of nullity due to collusion in bad faith.

The first avenue is the creditor’s right of rescission, which is stipulated in the Contract Section of the Civil Code. Article 538: If the debtor disposes of property rights and interests without compensation by abandoning its claim, waiving the guarantee of the claim, transferring property without compensation, or maliciously extending the period for performance of its due claim, which affects the realization of the creditor's claim, the creditor may request the people's court to revoke the debtor's act. Article 539: If the debtor transfers property at an obviously unreasonable low price, assigns another person's property at an obviously unreasonable high price, or provides security for another person's debt, which affects the realization of the creditor's claim, the debtor's counterpart knows or should know the situation, the creditor may request the people's court to revoke the debtor's act. Article 540 provides clearly that the scope of exercising the right of revocation is limited to the creditor’s claim, and the necessary expenses incurred by the creditor in exercising such right shall be borne by the debtor. Once the act is revoked, it is not legally binding from the beginning according to Article 542.

The second avenue is that the contract is void due to collusion in bad faith. Article 154 of the Civil Code: A civil legal act entered into by a party and the other party in collusion to the detriment of the legitimate rights and interests of others is void. This provision targets situations where the debtor and the assignee collude to defraud the creditor, with an effect that is more comprehensive than mere revocation—it does not merely become revocable; rather, it is void ab initio. After a legal act is declared invalid, in accordance with Article 157, any property obtained by the party as a result of such act shall be returned; if return is impossible or unnecessary, the party shall provide monetary compensation equivalent to the value of the property.

The difference between the two approaches lies primarily in the difficulty of the proof. The right of revocation follows a relatively objective standard, as long as it is proved that the debtor transfers the property without compensation, or transfers the property at an obviously unreasonable low price, and affects the realization of the creditor's rights, the court can revoke it, without having to figure out the inner motives of the debtor. And For a contract to be invalidated due to collusion in bad faith, it is necessary to prove the subjective state of collusion., according to the rules of evidence in civil procedure, the proof of the parties who advocate malicious collusion should reach the level beyond reasonable doubt, which is close to the proof level of criminal conviction. Therefore, the priority in practice is usually: first use the right of revocation, only to get the chat records of the conspiracy between the two sides, money return vouchers and other hard evidence, and then overlay the claim that malicious collusion is invalid.

2. what transfers will be revoked

The right of rescission is not a master key. It is aimed at the kind of disposition that reduces the debtor's liability property and makes it impossible to pay off the debt. The following are some common types.

Gratuitous gift. Give real estate, vehicles, and deposits directly to children, parents or friends, or sign a sales contract in name, but the actual money is not received. A case heard by the court of Helan County in Ningxia is very typical: Wang transferred the house to his mother at a contract price of more than 500000 yuan when the divorce mediation agreement with his ex-wife came into effect and was obliged to pay more than 1990000 yuan, but admitted in court that he had not received any money from his mother. Based on this, the court determined that the transfer was gratuitous and ruled to rescind it, ordering that the registration be restored.
Renounce one’s rightful share in the jointly owned property. The half of the joint property of husband and wife that belongs to them is also the property rights and interests. If they are given out for nothing, they will still be revoked. In a case heard by the People’s Court of Lanling County, Shandong Province, Zhao A stipulated in a marital property agreement that jointly owned real estate would be solely owned by his wife, thereby effectively waiving his co-ownership interest without compensation. The court determined this to constitute an unpaid transfer and ruled to invalidate that provision.
Waiver of claims and waiver of claim guarantees. The debtor, who is someone else's creditor, renounces the claim in writing, or voluntarily exempts the guarantor from the guarantee liability, all belong to the free disposition of their own property rights and interests.
Transferring property at a conspicuously unreasonable low price.To what extent must a price be low to be considered manifestly unreasonable? Generally, the market price is used as the benchmark; in practice, a comprehensive assessment is also made by considering factors such as whether the parties are relatives, whether the payment was actually made, and whether funds were subsequently returned.
Assign property at a clearly unreasonably high price and provide security for the debts of others. These two acts will shrink the debtor's property and also fall within the scope of Article 539.

no matter what kind of behavior, all must meet a common premise-affect the realization of creditor's rights. If the property remaining after the debtor disposes of the property is still sufficient to pay off the entire debt, the creditor has no right to avoidance. Therefore, the first step in a court’s review is often to ascertain what assets the debtor still possesses and whether the debtor remains capable of fulfilling its obligations. In a revocation case in Guangdong Yingde Court, Kong Moujia used two houses to offset his parents' loan, but was unable to pay his ex-wife's 800,000 yuan in compensation. The court found that it had harmed the interests of creditors.

3. what kind of gift can't be revoked

Not everything sent out can be recovered. In cases where a business owner gifted assets to their children years ago, only to later incur debts as a guarantor, and the creditor subsequently seeks to rescind that gift, courts often rule that the gift remains valid.

The gift occurs before the debt is incurred and is not intended to escape the debt. There is a widely circulated case: Zhao Zong and his wife gave a set of real estate to their daughter in 2015, and they did not bear the debt due to joint guarantee to the enterprise until 2004, with an interval of nine years. The court held that entrepreneurs could not foresee the wind and rain nine years later, that the gift of that year was a normal inheritance of wealth, and that creditors could not argue that the gift nine years ago was to avoid the debt nine years later.
The transferee is in good faith, paid, and paid reasonable consideration. If the third party does buy the property according to the market price, pays the money in real money, and is not aware of the situation of the debtor, the creditor's request for cancellation usually fails.
is a necessary property to maintain basic life. The items that are punished are necessary for the family to maintain their basic life, which have nothing to do with debt evasion, and are generally not within the scope of revocation.
Creditor insufficient proof. The party asserting a right must provide evidence to prove when the property was transferred, the price involved, and whether the debtor still has the capacity to perform. The evidence is insufficient; the court can only dismiss the case.

Putting these together, the chronology is almost decisive:If the transfer of property precedes the incurrence of debt and there is no evidence of an arrangement to evade creditors, the gift is often legally sound and difficult to challenge; however, if the transfer occurs immediately after the debt arises—especially during litigation or enforcement proceedings—the validity of the gift is highly questionable.

Common "routines" and identification of the 4. debtor party

There are many ways to avoid debts. In fact, there are only a few types.

Clean yourself out of the house in the divorce agreement or mediation document.The debtor has unilaterally agreed to transfer all marital joint property to the spouse, keeping only the debts and no assets for himself. In a case heard by the Wen'an County Court in Hebei Province, Xing Mou in the divorce mediation document to the spouse of the two properties, the name of another property in the divorce was not divided, the court found that this is a free disposition of property rights, affecting the realization of claims, the decision to cancel the mediation of the property division clause.
Give the property and company equity to the children. In a case retried by the Nanjiang County Court in Sichuan, Hu Mou1 and Zhang Moumou gave all the joint property of the husband and wife to their son in the divorce mediation. Later, there was no property under the name of the debtor to be executed. The retrial court defined the case as a dispute over the creditor's cancellation right and revoked the donation clause in the divorce mediation.
Sell to relatives at low prices. Nominally a normal transaction, in fact the price is much lower than the market, the payment is not actually paid or quickly returned.
Debt in return. With real estate, vehicles to pay off a debt, the appearance of paid, but the debt price is often inflated, equivalent to disguised half of the property sent out.

These types of techniques have a common feature: The time point is highly stepped on before and after the debt crisis. Claims into litigation, the judgment is about to enter into force, the application for enforcement of property changes, will naturally be the court cast a more cautious eye.

How to exercise the right of revocation of 5.: who will sue, who will sue, and how long will it take?

Who can sue. The plaintiff must be a creditor with a legal and effective claim against the debtor, and this claim must in principle be formed before the act of avoidance. Only when there is debt first and then debt evasion can we talk about affecting the realization of creditor's rights. In the Sichuan Nanjiang retrial case, the court specifically confirmed that Yue's claim was formed before the act of gift, and only supported the revocation.

To whom. The defendant in an avoidance action is the debtor, and the assignee and beneficiary are usually listed as co-defendants, since they are required to return the property and cooperate with the resumption of registration after avoidance. It is often difficult to enforce a judgment by suing only the debtor without adding the assignee.

Within how much time should it be reported? This is the most easily overlooked, but also the most deadly link. Article 541 of the Civil Code stipulates that the right of avoidance shall be exercised within one year from the date on which the creditor knows or should have known the cause of the avoidance; if it is not exercised within five years from the date of the debtor's act, the right of avoidance shall be extinguished. These two periods are the period of exclusion, there is no suspension, interruption, once passed, the right itself is eliminated, rather than simply lost.

How should a statement of claim be drafted? The core is three: requesting the revocation of the disposition between the debtor and the counterparty, requesting the counterparty to return the property to the debtor, or cooperating with the restoration of the real estate to the debtor's name, and requesting that the debtor bear the necessary costs of exercising the right of avoidance. It should be reminded that the revocation action only resolves whether the act can be revoked, and does not mean that the property is awarded to the creditor. In the Shandong Lanling case, the plaintiff also wanted the court to confirm the ownership and share of the property together, which the court clearly pointed out was beyond the scope of the revocation lawsuit. If you want to get the money, you have to go through the follow-up procedures.

What happens after the 6. is revoked

The revocation of the act is to restore the debtor's liability property, and then the creditor will be paid through the execution procedure.

First, the act is not legally binding from the beginning. Article 542 of the Civil Code stipulates that after the debtor's disposition affecting the realization of the claim is revoked, it is not legally binding from the beginning and does not count from the moment it is signed, not from the date of the judgment.

Second, property return and restitution. Property that has already been delivered shall be returned to the debtor; in cases involving real estate, vehicles, and the like that have already been transferred, the judgment typically orders the registration to be restored in the debtor’s name. The judgments in the cases of Helan in Ningxia, Yingde in Guangdong and Nanjiang in Sichuan are all based on this idea, first revoking the act and then resuming registration.

Third, what to do if it has been circulated again. If the property has already been transferred to a bona fide third party, and the original item cannot be returned, compensation in kind shall apply, with the party who acquired the property compensating the corresponding price; if the transferee was at fault for the damage, they may also be liable for damages.

Fourth, the scope of revocation is limited to creditor's rights. The right of avoidance is not the whole pot end of the debtor's disposition, but the amount of the claim as the boundary, beyond the part of the claim still belongs to the debtor's free property.

7. Practical Operations from the Creditor's Perspective

One is to find out the property clues. Real estate registration information, vehicle registration, equity and industrial and commercial information, bank accounts, social security provident fund, and external claims should be sorted out as much as possible. The key is to compare the timing: when the property was transferred out of the debtor’s name, to whom it was transferred, and at what price. These clues often rely on the court investigation order, the lawyer investigation power to obtain.

The second is to apply for preservation in time. Once it is discovered that the debtor is transferring property, it should apply for property preservation as soon as possible to freeze the disputed property first. The significance of this step is to prevent the property from being transferred again during the litigation-the house is sold to a bona fide third party in the course of the lawsuit, and the difficulty of recovery increases exponentially.

The third is the fixed evidence list. The core includes: evidence of the true existence of the claim and the time of its formation; the contract for the transfer of property, the record of the registration of the transfer; the flow of money that is unreasonable or the payment has not actually been paid; the material that the debtor has been unable to perform after the transfer; and the record of claiming the right within the statutory time limit. The more complete the evidence, the easier it is to establish the requirement that affects the realization of the creditor’s rights.

8. Risk warnings from the debtor's perspective

To put it another way, say a few words to the debtor. Transferring property to avoid debt is not a legal property planning, but a high-risk road.

An act may be revoked or held invalid. Free gifts, low-cost transfers, and abandonment of common shares may be beaten back to their original form by a judgment as long as they affect the realization of creditors' claims.
may touch the crime of refusing to execute the judgment or conviction.After a judgment or ruling has taken legal effect, concealing, transferring, or selling off property in such a way as to render the judgment unenforceable may, if the circumstances are serious, constitute a crime. In the aforementioned Guangdong Yingde case, the creditor filed in the complaint that the actions of the two defendants were suspected of violating the crime of refusing to execute the judgment and ruling.
Risk of False Litigation. In order to fight against creditors, fictitious debts with relatives, concocted false sales contracts or false litigation, the circumstances may constitute the crime of false litigation.
Family members living together. Pull parents, spouses, and children into the transfer chain. Once the behavior is revoked, the family will not only lose their property, but may also be added as a defendant.

The really safe way is to complete the property planning at the stage when the debt is still very clean, instead of waiting for the debt to move.

class case reference: in the case of property dispute after the divorce between zhao mou and zhu mou, the creditor's right of revocation lawsuit of the outsider has come into effect to revoke the transfer of the house in dispute in the divorce agreement, and the court accordingly changed the judgment and rejected the plaintiff's claim for the ownership of the house according to the divorce agreement. It can be seen that if the debtor evades the debt by means of a divorce agreement for free or at a low price, the creditor may appeal for revocation. Trial Court: Intermediate People’s Court of Ningbo City, Zhejiang Province Case Number: (2011) Zhe Yong Min Yi Zhong Zi No. 712

9. Frequently Asked Questions

1. the debt has not been confirmed by the judgment, can you sue for cancellation first?

can claim, but different places hold. The right of revocation requires a legal and valid claim, some courts require that the claim has been confirmed by the effective judgment, and some accept the existence of the claim by contract, loan, transfer certificate. The prudent approach is to first complete the confirmation of the claim or arbitration, get the effective instrument, and then file a revocation suit.

2. property has been transferred to others, can it be revoked?

Yes. The object of the right of revocation is the completed disposition, and the transfer itself is the manifestation of the transfer. As long as the two conditions of free or obviously unreasonable low price are met and affect the realization of the claim, even if the house has been registered in the name of the transferee, the registration may be revoked and restored, provided that the transferee is not a third party who is paid in good faith.

3. If a debtor gifts a house to their adult children, can it be recovered?

It depends on two points: when the gift occurs, and whether the debtor has the ability to perform. If the gift is made before the debt is created and there is a legitimate reason for inheritance, recovery is difficult.

4. the right of revocation for more than a year, is it hopeless?

It depends on which day the year starts. The starting point is the date on which the creditor knew or should have known the cause of the avoidance, not the date on which the act occurred. In many cases, creditors only know about the transfer when they cannot find the property at the execution stage, and the starting point may be relatively low. However, attention should still be paid to the absolute limit of five years, beyond the five years from the date of the act, the right is determined to be eliminated.

Can I be awarded the money for the 5. revocation?

No. The action of avoidance only resolves whether the act can be revoked and the property can be returned, and does not directly order the transferee to pay the creditor. After the property is restored to the debtor's name, the creditor is still required to be paid through the original enforcement procedure.

Who will bear the costs of the 6. revocation lawsuit?

In accordance with article 540, the necessary costs of the creditor's exercise of the right of avoidance shall be borne by the debtor. The common case acceptance fees and preservation fees in the judgment are mostly borne by the debtor; however, the part that clearly exceeds the necessary range is still borne by the debtor.

Practical experience of 10. lawyers

Many people think that there is no chance as long as the other party has already sent something out. In fact, they should first divide the transfer into categories instead of sighing. The first thing to do in practice is not to sue, but to put out the four things in order: the time of borrowing money, the time of conversion, whether the transferee is his own family, and how much property is left after the conversion. The debt occurred in the front, the free transfer in the back, and after the transfer in the name of the other party has no obvious property available for execution, the revocation of the certainty is much greater. If the initial assessment is incorrect, all subsequent actions will be in vain.

If a creditor wants to do something, the starting point is to verify the clues, not by feeling. Real estate can apply for inquiry and registration changes, vehicles have transfer records, companies have industrial and commercial changes, these are verifiable objective materials. During the lawsuit, while requesting revocation, he applied for the seizure of the subject matter to prevent the lawsuit from being hit and the things being transferred again. In particular, the time limit should be closely watched. The right of revocation is generally exercised within one year from the time when the cause of revocation is known or should be known. The act will be eliminated after five years. Many people lose not for reason, but for one year.

From the debtor's point of view, sending the property out first is often not a safety mat, but an amplifier. Clean-out agreements, transfers that are significantly lower than the market price, and temporary transfers to relatives, as long as they are deemed to have evaded debts, not only may they be revoked and the property returned to the original road, but they may also be claimed to be malicious collusion and the behavior is deemed invalid. If the circumstances are serious, it will also lead to the problem of refusal to execute, escalating civil disputes into even greater troubles. If you really want to straighten out the property relationship, you should also use a real transaction and reasonable consideration before the debt occurs, rather than when you are being pursued. The party who has signed an unfair agreement should also assess whether he is involved in the risk of joint and several risks, and should not just look at the present.

Back to the original question: Can the creditor recover the property given away in order to avoid debts? The answer is to divide the situation. Free gift, obviously unreasonable low-price transfer, waiver of creditor's rights or common share, as long as it occurs after the debt is generated and affects the realization of the creditor's rights, the creditor can return it to its original form through the right of cancellation, and can also claim malicious collusion and invalidity if necessary. However, gifts that occur before the debt, for the purpose of legitimate inheritance and the transferee's good faith and compensation are usually difficult to shake.

For creditors, it is suggested to grasp three things: early discovery, early preservation and early prosecution. Property clues should be found out, the time node should be fixed, and the evidence should be chained. To win the revocation lawsuit, only to bring the property back to the debtor's responsible property, and the real repayment depends on the continuous completion of the execution procedure. For the debtor, it is important to understand that there is almost no place to hide the property when the debt is entangled, and rather than risk being revoked and held accountable, it is better to put the property planning at the time when the debt is innocent.