A debtor is hiding or stripping their assets: what the creditor can do

When a company or an individual stops paying a debt, there is not always a crime. It may be genuine insolvency, a temporary lack of liquidity or a dispute over whether the debt exists or how much it is. The situation changes when the debtor starts transferring assets, withdrawing funds, using front companies or placing assets in third parties’ names in order to prevent creditors from being paid.

For a business creditor, speed matters. The first step is to tell financial difficulty apart from a strategy of hiding assets, and to gather evidence before it disappears.

When may there be an offence?

The Criminal Code punishes concealment of assets (alzamiento de bienes). Among other conduct, it punishes anyone who removes their assets to the detriment of their creditors, or carries out acts of disposal or takes on obligations that delay, hinder or prevent the effectiveness of an attachment, an enforcement procedure or a judicial, out-of-court or administrative collection procedure, whether already started or foreseeable. The penalty is one to four years’ imprisonment and a fine of twelve to twenty-four months. If the creditor is a public authority and the debt is a public-law debt, imprisonment may reach six years. The penalty is imposed in its upper half where the amount defrauded exceeds €50,000 or the debtor abuses their business credibility (Article 257 of the Criminal Code).

This may include gifts to relatives, sham sales, transfers at clearly abnormal prices, contributions of property to companies controlled by the debtor, unjustified cash withdrawals, assignments of receivables without real consideration or the use of third parties’ accounts. The debtor need not disappear altogether, nor need all their assets have been hidden. What matters is that the conduct seriously hinders the chances of recovery and that there is an intention to defraud.

The same offence is committed by anyone who strips their assets to avoid paying compensation they have been, or may be, ordered to pay for another offence (Article 257(2) of the Criminal Code). And, once enforcement is under way, it is also an offence to submit an incomplete or false statement of assets, or to fail to submit one when the court requires it (Article 258 of the Criminal Code).

Criminal liability may also arise where a debtor who is insolvent or about to become insolvent hides or destroys assets, makes transfers or takes on debts without economic or business justification, keeps a double set of books or alters the documents needed to understand their financial position. These are the criminal insolvency offences, which can only be prosecuted where the debtor has stopped regularly meeting their obligations or has been declared insolvent (Article 259 of the Criminal Code).

Insolvency proceedings do not prevent criminal prosecution either: concealment of assets is prosecuted even if insolvency proceedings are opened after it was committed (Article 257(5) of the Criminal Code).

Not every payment or sale is concealment of assets

A debtor is not barred from disposing of their assets simply because they owe money. A sale at market price, a transaction needed to keep the business going, the payment of ordinary expenses or the settlement of a genuine debt may all be justified. Nor does the existence of several creditors automatically turn payment to one of them into a criminal offence.

That is why a complaint should not rest solely on a debt remaining unpaid. It will be necessary to analyse how close in time the claim and the transactions were, the price, the relationship between the parties, where the money actually went, whether there are unencumbered assets and the financial position known to the debtor and its directors.

What the creditor should do immediately

Draw up a precise timeline. Keep the contract, invoices, acknowledgements of debt, due dates, payment demands, claims, court decisions and any communication in which the debtor acknowledges the debt or announces a transaction involving its assets.

It is also useful to gather information on property, vehicles, shareholdings, directors, related companies, known accounts, changes of address, cessation of business and recent transfers. Available bank statements, emails, messages and accounting documents can help show what happened to the funds.

The investigation must be lawful and orderly. Do not access the debtor’s accounts, devices or systems without authorisation, or contact third parties under a false identity. Evidence obtained improperly may lose its value and create further problems.

Why a querella is the right course

With a querella (a private criminal complaint filed by the victim), the creditor is a party from the very first filing. It proposes the investigative measures that allow the path of the assets to be traced: requests to banks, notaries and registries, corporate records or a forensic accounting report. And in the same filing it asks for the defendant’s assets to be attached (Article 277 of the Criminal Procedure Act). Whoever merely files a police report (denuncia) is not a party, and the investigation remains in the hands of others, with their own timing. In concealment of assets, that time is exactly what the debtor needs to keep transferring assets.

The complaint should be brought against everyone involved: the debtor and, if it is a company, its formal directors and those who actually control it. Above all, it should also be brought against those who received the assets: relatives, front companies or third parties who helped. This is not a formality. The Supreme Court has pointed out that, if the prosecuting parties do not bring the recipients of the assets into the proceedings, the court cannot annul the transfers, nor can it simply replace annulment with compensation. The creditor may end up with neither (Supreme Court Judgment 298/2026 of 23 April).

The complaint should set out a chronological account, quantify the debt, describe the suspicious transactions and explain why they have hindered recovery.

Asset-freezing measures in criminal proceedings

Criminal proceedings make it possible to act on the debtor’s assets from the start of the investigation, without waiting for the judgment:

• Bond and attachment. Where there is evidence against the defendant, the court requires them to post a sufficient bond to secure their financial liabilities and, if they fail to do so, attaches sufficient assets. This is dealt with in a separate file (Articles 589 and 590 of the Criminal Procedure Act).
• Measures against the gratuitous recipient. Anyone who receives the debtor’s assets free of charge without having taken part in the offence (the son to whom the property is donated, or the related company to which the money is transferred) is a gratuitous recipient of the proceeds of the offence (partícipe a título lucrativo). They are not accused, but they must return the asset or compensate the loss up to the value of what they received (Article 122 of the Criminal Code). Once that participation appears, the court, at the request of the injured party appearing as civil claimant, requires them to post a bond and, if they fail to do so, attaches their assets (Article 615 of the Criminal Procedure Act). If the third party knowingly helped the debtor, they are no longer a mere recipient but a participant in the offence, and must be named as a defendant in the complaint.
• Measures under the Civil Procedure Act. In criminal proceedings the court may also order, among others, preventive attachment, judicial intervention in or administration of productive assets, inventories, entries in the Land Registry or other public registers to prevent further transfers, and orders to refrain from certain conduct (Article 764 of the Criminal Procedure Act, in conjunction with Article 727 of the Civil Procedure Act).

The application must explain the risk, identify the assets where possible and provide material showing that the claim is credible and that the outcome of the proceedings needs to be secured. These measures are not automatic, but in concealment of assets the risk of further transfers is usually the very conduct under investigation.

What the criminal judgment achieves

The aim is not only a conviction. In concealment of assets, the general rule is that the criminal judgment declares void the transactions by which the debtor reduced its assets, so that the assets return to the debtor and the creditor can enforce against them. Only where those assets cannot be recovered, because a third party acquired them in a way protected by law, is compensation awarded instead, and it cannot exceed the value of what was removed (Supreme Court Judgment 298/2026 of 23 April; Article 111 of the Criminal Code).

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