When Couples Divorce to Hide Property From Creditors: Three Singapore Court Cases and What They Mean for Owners

In such cases, the spouse who owes money would generously “give up” his or her claim to marital assets, as a ploy to prevent creditors from going after assets held by the other spouse who is not linked to the loan.

What such couples do not realise is that all transfers of money and property will leave paper trails, and creditors can always apply for court orders to freeze such assets if they can show that the transactions are done with ulterior motives.

Most estranged couples will fight tooth and nail over their assets, but this case immediately made the creditors smell a rat as the husband willingly transferred a chunk of his savings and his share in four condominiums to his wife when they filed for divorce.

He was so generous that the whole episode looked unreal, as he even signed an agreement to pay the mortgage on the properties and S$2,000 a month in child maintenance, even though he would be penniless after giving everything away.

Soon after, the former wife pocketed over S$7 million from the sale of three condo units. Despite their divorce, the couple continued to live in their remaining S$5 million home in the Orchard Road area. Another telltale sign that the couple were hiding money from their creditors: the wife kept S$3 million in cash at home, presumably to make it easier to move the stash out of the country. But the creditors hit back with a worldwide injunction to freeze the wife’s assets, which the High Court granted. The court ruled that the divorce would not prevent the debtor from being sued, especially when he “voluntarily impoverished himself by giving everything away”.

The wife in this case filed for divorce barely a month before bankruptcy action was initiated against her husband. They then agreed to part by mutual consent, with the wife keeping all the proceeds from their apartment, which would be sold within six months of the final judgment.

When a bankruptcy order to seize the property was later issued against the husband, the wife applied to the High Court to prevent the seizure, claiming that the home was hers alone.

As it turned out, the wife had sold the property and pocketed the sale proceeds of over S$800,000 even before the divorce hearing, but the pair chose to hide this fact during their “divorce”. The court dismissed her application to stop the creditors from claiming her husband’s share of the assets, noting that her action was “strongly indicative of guilty knowledge”. The court rebuked the wife, describing her conduct as “a deception” to mislead the court into granting the divorce order.

The couple in the last case filed a hasty divorce right after the husband was sued but before he was eventually declared bankrupt. In the process, the husband agreed to an order that required him to transfer his interest in two properties to his wife.

When the creditors later sued for the properties, the High Court found that the transfer was merely a ploy to avoid settling the debt. The wife appealed, arguing that the bankruptcy law should not apply to her case because the properties were transferred according to a court order in their divorce.

But the Court of Appeal rejected her case, as allowing it would lead to a situation where non-genuine private transfers in divorce are shielded from creditors just because these are approved by the courts. The court noted that there was no basis to prevent creditors from seizing the properties because liquidators and official assignees have been allowed in past cases to “go behind” court orders to scrutinise suspicious transactions.