Basics of Bankruptcy Law in Indonesia

A. What is Bankruptcy?

According to Article 1 No. 1 Law No. 37 Year 2004 regarding Bankruptcy and Suspension of Debt Payment Obligations (usually called Bankruptcy Law). Bankruptcy Law is a specialized field of law created as one of the legal means for debts settlement.

Bankruptcy shall mean general confiscation of all assets of a Bankrupt Debtor that will be managed and liquidated by a Curator under the supervision of Supervisory Judge as provided for herein.

Creditor shall mean the person who has receivables from an agreement or a law that may be collected before the court.

Debtor shall mean a person who has indebtedness for which it may be demanded to pay before the court.

Bankrupt Debtor shall mean a debtor who has been declared as bankrupt with judicial decision.

Curator shall mean the Orphans Chamber or an individual appointed by the court to manage and liquidate the assets of Bankrupt Debtor under the supervision of Supervisory Judge as provided for herein.

B. Who Can File for Bankruptcy?

Article 2 of Bankruptcy Law determined the parties that can file petition of bankruptcy:

1. The debtor itself;
2. Creditor;
3. The judiciary, if it is public interest;
4. If the Debtor is Bank, the petition may only be filed by Bank Indonesia;
5. If the Debtor is a Security Company, Stock Exchange, Clearing and Custodian Institution, Settlement and Depository Institution, the petition may only be filed by Financial Service Authority as a substitute of Capital Market Supervisory Board.
6. If the Debtor is an Insurance Company, Reassurance Company, Pension Funds, or State-Owned Enterprise which run in public interests, the petition may only be filed by the Minister of Finance.

 C. What is Requirements to File a Bankruptcy?

The main requirement as a strong legal basis in filing Bankruptcy Statement Petition, as stated in Article 2 paragraph (1) of Bankruptcy Law, are:

1. Debtor who has two or more two or more Creditors; and
2. Debtor who failed to pay at least one debt which has matured and payable.
3. Article 2 paragraph (1) of Bankruptcy Law:

A debtor having two or more creditors and failing to pay at least one debt which has matured and became payable, shall be declared bankrupt through a Court decision, either at his own petition or at the request of one or more of his creditors.

D. What are the Consequences of Bankruptcy?

The legal consequences of Bankruptcy of the Debtor based on the Bankruptcy Declaration Decision is the loss of rights to control and manage his/her wealth including bankruptcy estate as of the date of the pronouncement of the bankruptcy declaration decision (Article 24 paragraph (1) of Bankruptcy Law).

Bankruptcy includes all of the Debtors wealth during the bankruptcy declaration decision and all matter required by the Debtor during the bankruptcy process, but it does not apply to:

Any properties, including animal, that are badly needed by the Debtor in connection with his /her job, his or her equipment, medical equipment for health purpose, bed and related equipments that are used by the Debtor and his/her family;

Anything earned by the Debtor from his or her work as a salary for his or her position or service, as a fee, pension, or allowance as may be determined by the Supervisory Judge; or

Any money given to the Debtor to enable him or her to provide maintenance as required by the prevailing law.

According to Article 37 paragraph (1) of Bankruptcy Law, if there is an agreement to transfer merchandise and the person is required to deliver the merchandise before the bankruptcy, the agreement shall be terminated after the bankruptcy declaration decision, and the other party if is damaged because of the termination, the said party can file a request for compensation as Unsecured Creditor.

Furthermore, as the result of the enactment of the Debtor as Bankrupt Debtor during the Bankruptcy, the Bankrupt Debtor cannot leave his/her domicile without permission from the Supervisory Judge.

 E. What is the Legal Effort against Bankruptcy Declaration Decision?

Legal Effort which can be filed against Bankruptcy Declaration Decision is Cassation to the Supreme Court, and against the Verdict of Bankruptcy Statement Petition which has acquired binding legal force a Review Petition can be filed to the Supreme Court.