Asset stripping. What it is and examples

It is never a good idea to hide or make your assets disappear in order to avoid paying a debt. The reason? You are committing the offence of concealment as defined in the Penal Code. We would like to dedicate this article to it in order to clarify what it entails and what types exist.

What is asset stripping?

In the Criminal Code, asset stripping appears in Article 257 of Chapter VII of Title XIII of Book II. Specifically, it is a financial crime that occurs when a debtor, aware that he has to pay a debt, hides or makes his assets disappear. The aim? To acquire a situation of insolvency that allows him to avoid payment.

The legal asset protected by the offence of concealment of assets is therefore the right of every creditor to collect the debt. It should be noted that even if the concealment of assets by the debtor does not lead to real damage to the debtor, it is still punishable conduct.

Requirements for asset stripping to take place

The Criminal Code does not establish the requirements for this offence to be committed. Therefore, the Supreme Court established jurisprudence and set the following:

• There must be a debt, i.e. a monetary obligation between a debtor and a creditor.
• There must be concealment or destruction of assets.
• The creditor must have a prior claim. In other words, he must have lent the money legally.
• The destruction of assets must have led to the debtor's insolvency.
• It is mandatory that the debtor's intention was to harm the creditor.

Furthermore, the offence of concealment of property can be committed not only when a debtor tries to avoid paying a mortgage, a personal loan or any other credit product. It will also take place if the concealment of assets is aimed at violating the economic rights of workers, i.e. to receive their wages, severance pay, etc.

The four types of asset stripping

Depending on the seriousness of the action of concealing or destroying assets to prevent the collection of a debt, the judge considering the case may rule that one of these four types of asset stripping offence has been committed:

• The basic type. It carries a prison sentence of 1 to 4 years and a fine of 12 to 24 months. As its name suggests, it corresponds to any act of sale or destruction of goods carried out for the purpose of preventing the creditor from collecting the debt.
• The specific type. Here we can differentiate between two sub-types. The first of these refers to when the seizure of property is carried out with the aim of delaying or preventing judicial decisions (e.g. a levy of execution or a seizure). The other relates to avoiding the payment of compensation for civil liability, i.e. for having caused damage to a third party. The penalties specified are identical to those provided for in the previous paragraph.
• The aggravated type. When the asset stripping is committed for the purpose of avoiding the payment of a public law obligation (e.g. to the Treasury or the Social Security), the prison sentences can be increased to 6 years. Fines remain the same. The same applies when the creditor is a public legal person.
• The attenuated type. In this case, those who, in the middle of an administrative or judicial procedure, present a false or incomplete list of assets in order to delay it, are prosecuted. However, he/she will remain unpunished if, before the fact is discovered, he/she notifies a truthful one. In this case, the prison sentences range from 3 to 12 months and the fine ranges from 6 to 18 months.

I am accused of embezzlement, why?

Many people are surprised when they are accused of asset stripping. Therefore, in order to clarify this offence for our readers, we are going to give some examples.

Let's imagine that a married couple married in community of property has a debt that makes them fear the loss of their primary residence. At that moment, they decide to take the decision to take advantage of the separation of property regime, so that the house becomes exclusively the woman's and the man's obligation to pay.

This is a clear example of asset stripping, which can be even more obvious when a payment is simulated. Also when a couple divorces fictitiously, causing the property to pass exclusively to the spouse who does not owe the debt.

Both cases, although they may have more or less moral justification, imply that there is an intention to harm the creditor. Therefore, there is a case of asset stripping. A conduct that, as we have seen, is severely punished by the Criminal Code.