Seeking to avoid their obligations, debtors can take various actions in relation to their possible right to inheritance from a third party. A debtor may attempt to conceal the elements or the value of the estate. They could even reject the inheritance in court or a notary, but the creditor is not helpless in this situation. The purpose of this article is to introduce readers to a legal instrument protecting the interests of creditors in a situation where the debtor refuses an inheritance.
Cancel the rejection of the succession by the debtor
This instrument is closely linked to a claim for fraudulent transfer against a third party (regulated in arts. 527 to 534 of the Polish Civil Code). This instrument is governed by art. 1024 of the Civil Code, according to which, if an heir rejects a succession to the detriment of the creditors, any creditor whose claim existed at the time of the rejection of the succession may demand that the rejection of the succession be deemed without effect with respect to the creditor, in accordance with the provisions relating to fraudulent transfer claims against a third party.
According to art. 1024 of the Civil Code, the protection of the interests of creditors also applies to a particular bequest. In accordance with art. 9851 of the Civil Code, the provisions relating to succession title, acceptance and rejection of succession, capacity to inherit and unworthiness apply to specific legacies as the case may be. In a situation where a transferor is designated by the original testator as heir and simultaneously as legatee of a specific legacy, there are two declarations of acceptance or refusal. If the debtor accepts the succession, but refuses the specific legacy, this opens up the possibility of applying Art. 1024 in the part concerning the rejection of the specific bequest.
Basis of creditor protection
For a creditor to benefit from the protection of art. 1024 of the Civil Code, they must meet two main prerequisites:
- First, the element of harm to the creditor
- Second, the existence of the claim at the time of the rejection of the inheritance.
In the simplest sense, based on Art. 1024, the prejudice to creditors consists in avoiding a situation of total insolvency, or greater insolvency, by not accepting the succession, that is, by rejecting potential assets from which the creditors could obtain satisfaction. Despite this difference in the cause of insolvency (compared to a “classic” fraudulent transfer request against a third party), the effect is the same, that is to say the prejudice to the creditors by an impact on the patrimonial situation of the heir which ultimately leads to a state of insolvency of the debtor and to the prejudice of the creditors.
As we have seen, the claim must exist at the time the inheritance is rejected. The debt must be contestable, but whether it is due and payable does not matter. The condition of existence of a claim introduced in art. 1024 unfortunately excludes the protection of future claims (provided for in art. 530 in fraudulent transfer claims against a third party). Consequently, only a person whose claim against the heir existed at the time of the rejection of the succession has standing to act under art. 1024.
However, the fact that the heir acted with knowledge of the damage caused to the creditors is not a necessary condition for requesting the cancellation of the rejection of inheritance. It is recognized by case law that it is not necessary for the debtor who rejects the succession to have acted with the knowledge of harming the creditors (Civil Code art. 527 §1), because all the factual situation required for the application art. 1024 is clarified in this provision. This opinion is justified by the argument that the introduction of additional preconditions would limit the rights of the creditor, which is not justified by the nature of the refusal of inheritance or by the wording of Art. 1024. Nor is it essential to a legal action that the heir taking over the rights of the heir who rejected the succession was aware that the rejection would harm the creditors of the original heir. The knowledge of the heir is irrelevant and the presumption of art. 528 does not apply. Further, for an action under s. 1024 to be effective, the state of knowledge of the heirs who were named to the succession and assumed the rights of the heir who rejected the succession, that the action was performed at the expense of the creditors, is also immaterial (e.g. Poznań Regional Court Judgment of 30 May 2014, Case No. XII C 982/13, LEX No. 1892858).
Pay attention to the statute of limitations!
A creditor may request that the rejection of an inheritance be declared without effect within six months of becoming aware of the rejection, but no later than three years after the rejection. It should be noted that when seeking to overturn the rejection of a succession, the introduction of these time limits in art. 1024 of the Civil Code excludes the application of art. 534 of the code, which provides for a period of five years (from the completion of the fraudulent act) in the event of a request for a fraudulent transfer against a third party. This is, among other things, why it is essential that creditors pay attention to the situation and behavior of the debtor as a potential heir.
Effects of undoing the rejection of an inheritance
If the court grants an application under Art. 1024 of the Civil Code, the rejection of the succession by the debtor is deemed unenforceable against this creditor, which translates into the possibility for the creditor to obtain satisfaction on the asset which, because of the rejection, has not been used to pay the creditor.
Jurisprudence considers that the annulment of the rejection of the succession by the heir entails “relative ineffectiveness”, that is to say that it produces legal effects only with regard to the creditor who contested the rejection of the inheritance (e.g. judgment of the Court of Appeal of Katowice of February 20, 2015, case no. I ACa 973/14, LEX no. 1661164). In such a situation, in accordance with Art. 532, the creditor against whom the debtor’s juridical act has been annulled may, by priority before the creditors of the final heir, claim satisfaction of the assets which, because of the annulled act, have not been used to pay the creditor. According to art. 1024 in conjunction with art. 532, satisfaction priority will not be possible in the event that the claims of the creditors of the heir have been secured by a mortgage. In our view, a successful creditor under Art. 1024 also does not have satisfaction priority over the creditors of the estate (against whom the debt was “inherited” from a third party).
The relief requested
As in the case of the fraudulent conveyance claim against a third party, when making a claim under s. 1024 of the Civil Code, special attention should be paid to accurately determine the nature, time of origin and amount of the claim whose protection is sought.