Is it possible to punish a bankrupt spouse for selling common property?

The Supreme Court of the Russian Federation (SC) will decide whether the ex-wife of a bankrupt citizen is responsible for the alienation of their jointly acquired property in order to protect it from creditors. This is the first time such a question has arisen in practice. Typically, the courts cancel the transaction, and the counterparty is obliged to return the received property or its value to the bankruptcy estate. However, lawyers do not know any examples of punishing the debtor’s wife and jointly holding her accountable.

The Supreme Court will consider whether the debtor’s spouse is responsible for the sale of their common property and in what case. According to the approach that has developed in practice, if there are common debts to creditors, spouses can go bankrupt jointly within the framework of one case, then foreclosure is applied to all property. If we are talking about the obligations of only one of the spouses, he alone goes bankrupt. In this case, only his personal assets and a share in jointly acquired property can be used to pay off debts (usually half, unless there is a prenuptial agreement with other conditions). After the sale of joint property at auction, the amount corresponding to the bankrupt’s share is included in the bankruptcy estate; the remaining funds are transferred to the second, non-bankrupt spouse.

The case in the Supreme Court concerns the second situation. Spouses Alina and Irakli Kolbaya divorced in July 2020. Shortly after this, Irakli Kolbaya filed for bankruptcy, and in November 2020, the Arbitration Court of the Moscow Region opened an insolvency case. After the start of the trial, on December 2, 2020, the debtor’s ex-wife sold a Mercedes-Benz V250 for 2 million rubles, and a couple of months later – a Lexus LX 570 for 6.3 million rubles. The buyer of the cars, Giga Kalandia, resold them to a third party at short intervals.

In April 2021, the debtor was declared bankrupt, after which his financial manager (FinU) challenged the contracts for the sale of cars, since the property was classified as jointly acquired by the spouses during marriage. Arbitration courts declared the transactions invalid, qualifying them as “gratuitous withdrawal of assets.” The courts considered the payment for the cars unproven, since the buyer did not confirm that he had funds for the purchase, and the proof of the transfer of money was only a receipt from the seller. In addition, the appeal noted the affiliation of the buyer with the debtor’s wife: Mr. Kalandia had a power of attorney to represent the interests of Alina Kolbaya, and the contract for the sale of the apartment was also drawn up in his name.

As a result, the buyer was charged 8.3 million rubles. (the cost of cars), since it is “impossible to return the property itself due to its alienation in favor of third parties.” At the same time, court decisions noted that Alina Kolbaya has the right to receive her share of the common property (half the cost of the cars) from this money. The courts rejected the request of the Financial Institution to hold the debtor’s wife jointly and severally liable along with the buyer.

Disagreeing with this, the Financial Institution filed a complaint with the Supreme Court, insisting on collecting funds from the bankrupt’s ex-wife as a co-defendant. He states that as a result of her “gratuitous transaction for the alienation of jointly acquired property in favor of an interested party, the debtor lost his share in the common property, subject to inclusion in the bankruptcy estate.” As a result of the transactions, “damage was caused to the property rights of the creditors,” and the legislation allows “joint and several recovery from persons who jointly caused the harm.”

Alina Kolbaya’s rights, according to the Financial Institution, will not be violated, since “she must return half the value of the common property to the bankruptcy estate,” and money would be distributed in the same way if the cars were sold as a joint asset of the spouses as part of the bankruptcy procedure of the ex-husband. Based on these arguments, the case was transferred to the Economic Collegium of the Supreme Court, and a hearing was scheduled for April 25.

Divorce in anticipation of the bankruptcy of one of the spouses or at the initial stage of the process is “quite widespread” in practice, notes arbitration manager Pavel Zamalaev. According to him, we can talk about either one of the ways to “terminate the regime of joint property”, or about abuse with the aim of causing harm to the interests of the creditors of the debtor spouse. According to YurTechConsult partner Mikhail Yasenkov, in most such cases, divorce and alienation of assets are aimed at “preserving property from possible claims of creditors.” Moreover, “often a divorce can be fictitious,” adds Zoya Galeeva, managing partner of the Center for Working with Troubled Assets.

However, Oleg Permyakov, a partner at the law firm Rustam Kurmaev and Partners, clarifies that “ordinary divorces occur against the backdrop of deteriorated relations between spouses,” so “the courts need to carefully examine the circumstances of the divorce” and the division of property in order to understand whether the transactions were made illegally purpose.

According to lawyers, challenging transactions for the alienation of property concluded shortly before or during the bankruptcy process “is widespread,” and there is a consistent practice of declaring such agreements invalid and recovering the asset or its value from the acquirer. However, lawyers are not aware of cases involving the debtor’s spouse as a joint defendant. Such disputes were not considered at the level of the Supreme Court, clarifies Mikhail Yasenkov. “In this case, the Supreme Court will create a precedent,” emphasizes Pavel Zamalaev.

Lawyers themselves admit the possibility of punishing the bankrupt’s wife. Actions to sell common joint property after the initiation of bankruptcy proceedings against the debtor spouse “cannot be regarded other than as a transaction aimed at causing harm (losses) to the bankruptcy estate,” says Zoya Galeeva. “Here, the involvement of the wife in solidarity with the buyer seems quite justified, since there is no evidence that she transferred 50% of the cost of the cars to the bankruptcy estate,” says Pavel Zamalaev. In his opinion, if the manager’s complaint is satisfied, “the Supreme Court will give another signal to unscrupulous debtors and their spouses about the inevitability of liability for transactions to the detriment of creditors.”

However, the question of the amount of liability of the debtor’s ex-wife is debatable. Mr. Permyakov believes that “both defendants must answer for the full amount.” In his opinion, “if the courts recognize the ex-spouse as a co-injurer of harm to the bankruptcy estate and creditors, then she is not entitled to a share in the jointly acquired property” and, along with the buyer, the full cost of the cars sold can be recovered from her.

There are other views on the situation. “Since the bankrupt’s debts are not the common obligations of the spouses, the debtor’s creditors have the right to count on only half the share,” believes Mikhail Yasenkov. Therefore, the lawyer continues, it is impossible to hold the spouse jointly and severally liable for the entire amount collected from the buyer. Pavel Zamalaev agrees with him. Ms. Galeeva adds that collecting half the value of the lost property from the ex-wife “meets the principle of fairness, since when dividing the common joint property legally, she would also have to transfer half the value of the asset to the manager.”

Lawyers expect that the Supreme Court will provide clarification on the nature and scope of liability of co-injurers for such situations.

Anna Zanina, Jan Nazarenko