A situation often occurs when a debtor, despite having unfulfilled obligations, begins to sell off his property. In this case, there is a risk that his creditor, even having applied to the court and collected the debt from him, will not be able to fulfill the court decision due to the debtor's lack of property at that time, which can be subject to collection. Is it possible to recognize transactions for the withdrawal of property by the debtor as invalid?
Formally, the law gives the creditor such an opportunity.
According to paragraph 5 of Article 350 of the Civil Code of the Republic of Kazakhstan (General Part), the creditor has the right to demand that any action of the debtor, as well as the owner of his property, be declared invalid if he proves that it was committed with the purpose of evading liability for breach of an obligation. In accordance with paragraph 3 of Article 158 of the Civil Code of the Republic of Kazakhstan, if one of the parties to a transaction committed it with the intention of evading the performance of an obligation or liability to a third party or the state, and the other party to the transaction knew or should have known about this intention, the interested party (the state) has the right to demand that the transaction be declared invalid.
According to Article 65 of the Civil Procedure Code of the Republic of Kazakhstan, each party must prove the circumstances to which it refers as the basis for its claims and objections. In this regard, when filing a claim to invalidate such transactions, it is the creditor who must prove:
- the intention of the debtor to evade the fulfillment of an obligation to the creditor;
- awareness of the buyers of the property of such intention of the seller.
It is very difficult to prove these circumstances in practice if the parties to the transaction deny it. Therefore, creditors are strongly advised to ensure the possibility of debt repayment, for example, by collateral, before such a situation arises.