Supreme Law Regulates “Evasion of Debt Through Divorce”: creditors can request cancellation of property disposition clauses
The Supreme Law allows the cancellation of divorce agreements’ property divisions in order to protect creditors’ rights after facing “debt evasion through divorce”.
On January 15th, the Supreme People’s Court released an interpretation of the Civil Code’s marriage and family provisions (second edition), along with four typical cases related to marriage and family disputes. As some couples intentionally seek to damage creditors by dividing their assets through divorce, the interpretation clearly stipulates that creditors can request the cancellation of relevant property division clauses in divorce agreements.
Chen Yifang, the head of the Supreme Court’s Civil Division One, explained that in recent three years, the number of first-instance marriage and family inheritance disputes resolved by courts nationwide is approximately 2 million cases per year, accounting for about 12% of all first-instance civil cases. Among them, divorce disputes account for nearly 80% of all family cases with approximately 1.5 million cases per year. Property division has become a focal point in divorce disputes. With the increase in the value of cases and the diversity of property types, as well as the intertwined issues in marriage, family, and property areas, complex cases have become more prevalent, and legal standards need to be unified urgently.
With a total of 23 provisions, this interpretation mainly addresses judicial difficulties related to real estate transfers between spouses, parents’ contributions for their children’s post-marriage housing purchases, the transfer of joint property by one spouse in violation of their loyalty obligations to another spouse, and the custody of minor children.
Pengpai News reported that some couples use one party’s name to borrow debts externally and transfer their assets through divorce to avoid repaying debts, which poses a significant challenge to creditors. To effectively regulate such behavior, the judicial interpretation clearly stipulates that creditors can request the cancellation of relevant property disposal clauses in divorce agreements.
According to Article 7 of the Civil Code, civil subjects should follow the principle of good faith when engaging in civil activities, act with honesty, and keep their promises. In cases where one party of a couple uses their name to borrow debts externally and intentionally avoids repayment by transferring all or most of their joint property to the non-debt party through divorce, it harms creditors’ interests. Deputy Chief Judge Wu Jingli stated that such behavior is unethical and should be firmly rejected by law.
The judicial interpretation clearly states that if a debtor maliciously avoids debts through divorce, creditors can refer to the Civil Code’s provisions on creditor’s right to exercise their cancellation rights and request the cancellation of relevant property division clauses in divorce agreements to protect their legitimate rights and interests.
Wu Jingli emphasized that the property division in divorce agreements often considers factors such as who will directly raise any minor children and whether one party has committed fault. It is not always an equal division. She also noted that the court considers various factors such as overall property division within the marriage, child support obligations, and fault in divorce before deciding whether to revoke divorce agreements related to these matters in a strictly controlled manner to balance marital issues with legal protections for creditors without harming the other party or minor children’s interests. Chen Yifang also stated that if one party regrets transferring property to children under a divorce agreement and requests reversal of this decision before completing property rights transfer, the court will not support such requests unless there are compelling reasons. However, if there are claims for non-performance or compensation for losses due to this reversal, it should be considered within legal constraints. Moreover, if a divorce agreement stipulates that no child support is required from one party but later children file a lawsuit seeking support based on actual needs related to their healthy growth and following principles that are most beneficial to them as minors are upheld by law.