Maintenance for the debtor’s relatives may be considered injurious to creditors | In Principle

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Maintenance for the debtor’s relatives may be considered injurious to creditors

Acts by a debtor benefitting a third party—a family member entitled to maintenance—can violate the interests of other creditors and frustrate their ability to satisfy their claims from the debtor’s assets. This entitles creditors to seek legal protection under Art. 527–534 of the Polish Civil Code. A fraudulent transfer claim against a third party can be used to set aside a deed establishing a maintenance obligation.

Often, debtors evade enforcement of financial obligations by transferring assets (including income from work or business) to their relatives. That way “everything stays in the family” and the debtor can claim before the court, creditors or bailiffs that there is nothing left, discouraging creditors from pursuing their claims.

If the transfer of assets takes the form of a gift, it is relatively easy to challenge the transfer as detrimental to creditors, using a fraudulent transfer claim against a third party.

However, debtors and their advisers are already aware of this, and are increasingly turning to more sophisticated forms of asset transfers to “protect” them from creditors. Such forms include establishment of maintenance (alimenty) for relatives, especially minor children. Here, it is worth recalling that maintenance claims belong to a privileged category in the order of satisfaction (second priority under Civil Procedure Code Art. 1025 §1(2)). This means that maintenance claims are subject to satisfaction much earlier than enforcing creditors’ claims (satisfied only in the ninth priority, Art. 1025 §1(9)). Thus, it may happen that when the debtor “appropriately” disposes of assets for maintenance obligations, there will be nothing left for other creditors.

Establishing maintenance for the benefit of a debtor’s relatives, including minor children, can sometimes be an abuse of provisions protecting the fundamental rights of persons requiring care or support from the debtor, when the real goal is to evade the debtor’s obligations. All too often, it is calculated to exert psychological pressure on creditors and judicial authorities. How so? To take away a penny from minor children, deprive them of the chance to develop, make them jointly responsible for their parents’ mistakes or failures?! Few people would hesitate to interpret or apply creditor protection provisions in such a way as to affect the fate of an objectively vulnerable person (in particular, minor children), who cannot be made “complicit” in the debt of their legal guardians. This attitude is exactly what dishonest debtors count on.

Of course, serious legal and moral dilemmas can arise in individual cases, e.g. when there is a conflict between the right to maintenance for minor children and the expectation of satisfaction by other creditors. But this does not mean that an in-depth analysis of the factual and legal situation of a particular case should be abandoned. It is worth examining whether the debtor’s establishment of maintenance for the benefit of relatives was fraudulent in whole or even in part, i.e. harming other creditors. As recently held by the Supreme Court of Poland (judgment of 5 October 2022, case no. II CSKP 552/22), the determination and amount of a debtor’s child maintenance obligations may be fraudulent with respect to creditors (Civil Code Art. 527) when, due to the priority of satisfaction (Civil Code Art. 1025 §1(2)), this will advance the maintenance claim over other creditors in the queue for satisfaction from the amounts obtained in enforcement against the debtor.

In that judgment, the Supreme Court pointed out that upholding a maintenance demand by children against a parent (including recognition by the court) should raise doubts especially when the maintenance obligation is to be awarded:

  • In a family where relationships are functioning smoothly
  • When the children’s needs are met in a properly functioning family, living in a single household
  • When the amount of maintenance is significantly higher than the average cost of living for a child of the claimant’s age.

The Supreme Court expressed a view that is worth quoting at length due to its universal sweep and practical significance: “In principle, children have the right to a standard of living equal to their parents, but this does not mean that parents earning hundreds of thousands of zlotys or holding considerable assets are obliged to maintain their children with amounts significantly exceeding the average expenses for children of the same age, health, interests and talents. Child maintenance is a benefit not only for support, but also for upbringing and for preparation for work and fulfilling various social roles in the future. Putting too much money at a child’s disposal, to be spent at will, does not further the ends of upbringing. But this may escape social and institutional control only until it becomes apparent that the parents obligated to provide child maintenance have debts that they should satisfy. In that case, not only the parents’ satisfaction of their own needs, but also the satisfaction of needs asserted by their children affecting the scope of the parents’ child maintenance obligation, must be reduced accordingly. Raising a child also means shaping his or her proper social attitudes, including the awareness that obligations should be fulfilled and debts paid. A child of wealthy but heavily indebted parents must recognise that the child’s needs should be curtailed until the parents meet their obligations.”

The remarks made by the Supreme Court with regard to children can be applied as relevant to any other relative for whom debtors have a maintenance obligation. In doing so, it should be stated unequivocally that the Supreme Court here does not give permission to challenge maintenance within the ordinary (average) level of expenses objectively necessary for the maintenance of children of a certain age, with a certain state of health and with certain interests and talents. However, in the Supreme Court’s opinion, and ours, nothing justifies a situation in which the debtors’ children lavish in opulence, with a standard of living clearly above the average of their peers, when their parents are seriously indebted and fail to pay other creditors. This is not how the Supreme Court interprets the parents’ maintenance obligation (under Art. 128 or 133 of the Family and Guardianship Code). Once again, it should be repeated after the Supreme Court that raising children consists also in shaping appropriate social attitudes, including the awareness that obligations should be fulfilled and debts should be paid. The lower courts approached by creditors with a fraudulent transfer claim against a third party challenging the establishment of maintenance for the debtor’s relatives should also take this aspect into account.

Aleksandra Cygan, Adam Studziński, adwokat, Dispute Resolution & Arbitration practice, Wardyński & Partners