When a debtor fails to pay, creditors are not limited to going after the debtor's obvious assets; the Civil Code gives them subsidiary remedies to reach assets the debtor has hidden, neglected, or fraudulently transferred. After exhausting the debtor's available property (the primary remedy), a creditor may pursue two special actions. Accion subrogatoria allows the creditor to exercise all the rights and bring all the actions of the debtor (except those inherent in the debtor's person) to satisfy their claim — for example, collecting a debt that a third person owes the debtor but which the debtor has neglected to collect. Accion pauliana (rescission of contracts in fraud of creditors) allows the creditor to rescind the acts or contracts by which the debtor has fraudulently transferred property to defeat the creditor's claim, such as a debtor donating or selling property to a relative to keep it away from creditors. Accion pauliana is a subsidiary remedy of last resort: the creditor must show they cannot otherwise collect and that the transfer prejudiced them; certain transfers by an insolvent debtor are presumed fraudulent. These remedies prevent a debtor from evading a legitimate debt by manipulating their assets, while protecting innocent third parties who acquired in good faith and for value.
Reaching Hidden or Transferred Assets
After exhausting the debtor's available property, a creditor has subsidiary remedies to reach assets the debtor has neglected or fraudulently transferred.
Accion Subrogatoria
Lets the creditor exercise the debtor's rights and actions (except purely personal ones) to satisfy the claim — e.g., collecting a debt a third person owes the debtor that the debtor neglected to collect.
Accion Pauliana
Lets the creditor rescind fraudulent transfers by which the debtor put property beyond reach (e.g., a sham sale or donation to a relative). It is a last-resort remedy; certain transfers by an insolvent debtor are presumed fraudulent. Innocent third parties in good faith are protected.
Practical Takeaways
- A creditor can reach neglected or fraudulently transferred assets;
- Accion subrogatoria = exercise the debtor's own rights;
- Accion pauliana = rescind fraudulent transfers, as a last resort.
Frequently Asked Questions
What can a creditor do if the debtor hides assets? After exhausting the debtor's available property, the creditor may use accion subrogatoria to exercise the debtor's rights, or accion pauliana to rescind fraudulent transfers.
What is accion subrogatoria? A remedy allowing the creditor to exercise all the rights and actions of the debtor, except those inherent in the debtor's person, to satisfy the claim, such as collecting a debt the debtor neglected to collect.
What is accion pauliana? A remedy allowing the creditor to rescind acts or contracts by which the debtor has fraudulently transferred property to defeat the creditor's claim, such as a sham sale or donation to a relative.
Is accion pauliana a last resort? Yes. It is a subsidiary remedy; the creditor must show they cannot otherwise collect and that the transfer prejudiced them. Certain transfers by an insolvent debtor are presumed fraudulent.
This commentary is for general informational purposes only and does not constitute legal advice. For guidance specific to your situation, please consult a licensed attorney.
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