You initiated enforcement proceedings for your receivable, but found that the debtor no longer has any attachable assets registered in their name. Often the reason is that the debtor has transferred their real estate, vehicle or business to relatives or third parties. This is precisely where the annulment-of-disposition action comes in — a powerful legal tool that renders such asset-dissipation transactions ineffective against the creditor. In this article, we explain the conditions and process of the action.
Important: This article is for general information only and does not constitute legal advice. The annulment-of-disposition action is subject to technical conditions and a forfeiting time limit; consult an expert lawyer for your situation.
The annulment-of-disposition action is one brought by a creditor who cannot collect their receivable from the debtor through enforcement proceedings, in order to render ineffective against themselves the transfers, gifts or sales the debtor made to dissipate assets. The action is regulated in Articles 277 to 284 of the Enforcement and Bankruptcy Law.
An important nuance: As a result of the action, the debtor's disposition is not deemed entirely void. Only the creditor who wins the action is granted the authority to request attachment and sale over the asset subject to the disposition. The third party who acquired the asset must also endure this compulsory enforcement.
According to the settled case law of the Court of Cassation, the following preconditions must exist together for the action to be heard:
Once the preconditions are met, it is examined whether the disposition falls within one of the grounds for annulment listed in the law:
Gifts and gratuitous transactions made within a certain period before attachment or bankruptcy are subject to annulment. Sales with a difference of at least one fold between the values may also be deemed gifts.
Unusual payments and security transactions made by the debtor for an existing debt while in a state of insolvency are assessed within this scope.
Dispositions made by the debtor with the intent to dissipate assets from creditors, where the other party was also aware of this situation, may be annulled.
Presumption in transactions between relatives: Where the asset is transferred to a spouse, descendants/ascendants or relatives up to a certain degree, a presumption of intent to dissipate assets is accepted. In this case, the burden of proof shifts significantly to the other party.
As a rule, the burden of proving the existence of grounds for annulment rests on the claimant creditor. However, in situations such as the transfer of the asset to close relatives, the existence of a clear indication is accepted, providing ease of proof. In determining an excessive difference between values, expert examination is taken as the basis.
The annulment-of-disposition action is brought against both the disposing debtor and the third party who acquired the asset, together (İİK Art. 282). Fourth parties who acquired the asset from the acquirer may also be joined to the action if they acted in bad faith.
Time limit is critical: The five-year forfeiting period begins to run from the date the disposition was made. If this period is missed, the action is dismissed. For this reason, it is necessary to act without losing time once you realise the debtor has dissipated assets.
If you cannot collect your receivable because the debtor has dissipated assets, we provide support in bringing and conducting an annulment-of-disposition action. Request a complimentary initial consultation to assess your situation.
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