As real estate transactions frequently occur in daily life, problems associated with them also consistently arise. One of the representative cases where a contract can be canceled by a third party after a real estate transaction, yet remains unfamiliar to the general public, is the issue of 'contract cancellation due to fraudulent conveyance.'
Fraudulent conveyance refers to a legal act under civil law where a debtor reduces their general assets to evade debt repayment. Common instances of fraudulent conveyance involve hiding, damaging, or transferring assets to others by means such as sale, gift, providing collateral, or property division.
In such cases, creditors can file a lawsuit to cancel the fraudulent conveyance against the beneficiary or transferee to recover the assets embezzled by the debtor, according to Article 406 of the Civil Act. The requirements for establishing fraudulent conveyance include that the creditor must have a claim, the debtor must knowingly perform a legal act that harms the creditor by hiding assets, and as a result of the fraudulent conveyance, the debtor’s debts must exceed their assets.
Lee Chang-hee, a civil law specialist attorney at Daeryun Law Firm, stated, “Creditors should carefully examine the requirements for fraudulent conveyance and cancellation lawsuits and prepare for litigation accordingly. To win, it is necessary to understand the Supreme Court’s rulings related to fraudulent conveyance and seek assistance from a specialized attorney with extensive experience.” He advised, “A fraudulent conveyance cancellation lawsuit must be filed within one year from the date the fact was known or within five years from the date of the legal act.”
Conversely, regarding bona fide transferees involved in fraudulent conveyance cancellation lawsuits, he explained, “If one is unjustly sued for fraudulent conveyance cancellation, the party can fall into great confusion. It is crucial to receive expert assistance to logically organize and assert one’s position and persuade the judiciary.”
He continued, “The key is to prove that the transferee is a bona fide purchaser,” emphasizing, “It is essential to thoroughly prepare evidence regarding the purchase circumstances, such as not being aware of the seller’s insolvency or lacking any special reasons to suspect the transaction, and that the transaction was conducted through normal procedures.”
Meanwhile, Attorney Lee Chang-hee of Daeryun Law Firm is a certified civil law specialist by the Korean Bar Association and handles real estate-related litigation, fraudulent conveyance cancellation lawsuits, distribution objection lawsuits, development charge lawsuits, and more.
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