Bankruptcy is a condition in which all bankrupt Debtor Asset is in confiscation for conducting an administrated and settlement by The Receiver with oversight from The Supervisory Judge. The bankruptcy mechanism is possible to apply against The Debtor because all The Debtor asset is a guarantee for any commitment made by The Debtor, as stipulated in Article 1131 Indonesia Civil Code, regarding:
“Every movable good and unmovable good owned by The Debtor whether existing or that will exist, into a guarantee for every commitment made by The Debtor”.
Every Debtor asset it’s not just being a guarantee for one of the Creditor but also a common guarantee for all Creditors, as stipulated in Article 1132 Indonesia Civil Code, regarding:
“The goods be a common guarantee for all Creditors against it proceeds from the sale goods divided as to ratio receivable each Creditor unless there is a valid reason for precedence”.
However, it should be noted that, even if The Debtor has been determined to be in bankruptcy, it cannot necessarily be concluded that The Debtor cannot carry out his obligations to each Creditor. For this reason, in the bankruptcy process, a general confiscation of all The Bankrupt Debtor asset can only be made and can’t be done yet a settlement in the context of repaying The Bankrupt Debtor debt to each Creditor. Settlement can only be made after The Bankrupt Debtor asset is in a state of insolvency. According to the explanation of Article 57 paragraph (1) Act No. 37/2004 regarding Bankruptcy and Suspension of Debt Payment (Act No. 37/2004), the meaning of insolvency is a state of inability to pay. Insolvency occurs when The Debtor was established in a state of bankruptcy.
Insolvency occurs when fulfilled a condition, as stipulated in Article 178 paragraph (1) Act No. 37/2004. The condition made The Bankrupt Debtor asset in a state of insolvency, among others:
- In a meeting for verifying receivables were not offered a Settlement Plan;
- A Settlement Plan denied or not accepted by Creditors;
- The Court refused to legalize a Settlement Plan.
Regarding a condition can make a state of insolvency because The Court refused to legalize a Settlement Plan, based on Article 159 paragraph (2) Act No. 37/2004 there are several reasons The Court can refuse to legalize a Settlement Plan, among others:
- The Debtor assets, include goods for which implemented the right to hold goods, much greater than the amount approved in Settlement Plan;
- Implementation of the Settlement Plan is not guaranteed enough;
- The Settlement Plan was reached by fraud, or conspiracy with one or more Creditors, or by the use of other dishonest efforts regardless of whether the Debtor or the other party cooperated to achieve this.
In addition, insolvency can also occur when there is a nullification of the Legalization Settlement (Homologasi), whether the Settlement was reached in the Bankruptcy process or Suspension of Debt Payment process. The nullification of the Legalization Settlement (Homologasi), can occur when The Debtor does not implement a Settlement Plan that has been legalized (Homologasi) (Vide Article 170 paragraph (1) Act No. 37/2004). The annulment of the Legalization Settlement (Homologasi) may be filed by Creditor, and if The Court accepted nullification of the Legalization Settlement (Homologasi), then against The Bankrupt Debtor asset is in a state of insolvency. On this basis, The Receiver must immediately initiate a settlement of The Bankrupt asset (Vide Article 175 paragraph (2) Act No. 37/2004). These conditions, also apply to the nullification of the Legalization Settlement (Homologasi) that reached in the Suspension of Debt Payment process. When the nullification of the Legalization Settlement (Homologasi) occurs, then The Debtor has been established in a state of bankruptcy and The Bankrupt Debtor asset is in a state of insolvency (Vide Article 291 paragraph (2) and the explanation of Article 292 Act No. 37/2004). In addition, as referred to in the explanation of Article 292 Act 37/2004, insolvency can also occur if on Suspension of Debt Payment process, The Court refused to legalize a Settlement Plan that was approved by Creditors because fulfilled a condition as referred to in Article 285 paragraph (2) Act 37/2004.
After The Bankrupt Debtor asset is in a state of insolvency, The Receiver can settle The Bankrupt Debtor asset, by making a sale of the asset in public through the State Auction Office or underlying hand with approval by Supervisory Judge, as stipulated in Article 185 paragraph (1) and (2) Act No. 37/2004. The Receiver can only make a sale of the asset in the underlying hand if previously a sale has been made in public at least 2 (two) times with evidence by the Auction Minutes (Decision of The Chief of the Supreme Court Republic of Indonesia No. 109/KMA/SK/IV/2020).
In addition, beside make a sale of the bankrupt asset, based on Article 189 paragraphs (1) and (2) Act No. 37/2004, The Receiver also drafts a List of Apportionments to be approved by the Supervisory Judge, which contains:
- Details of receipts and expenses include The Receiver fee;
- Creditor’s Name;
- Matched amount and each receivable;
- The part that must be received by the Creditor.
The List of Apportionments that have been assigned by the Supervisory Judge serves as the basis for The Receiver to make a payment for each Creditor.
Based on the description previously, it can be concluded that even though The Debtor has been determined to be in bankruptcy, it cannot necessarily be concluded that The Debtor cannot carry out his obligations to each Creditor. For this reason, in the bankruptcy process, a general confiscation of all The Bankrupt Debtor asset can only be made and can’t be done yet a settlement in the context of repaying The Bankrupt Debtor debt to each Creditor. Settlement can only be made after The Bankrupt Debtor asset is in a state of insolvency if it is fulfilled by the conditions that can make a state of insolvency according to the explanation previously.