Debt Collection in Indonesia

The debt collection process in Indonesia begins with an assessment of the debtor’s solvency, their business area, business history, availability of documentary evidence of the debt, ongoing court cases and enforcement proceedings, and the possibility of disputing the debt. This assessment determines the strategy that will be used on behalf of the client in the collection process.

If the debtor has no ongoing court cases or outstanding judgments for debt collection and is actively engaged in business activities, then it is advisable to use the out-of-court debt collection stage.

This stage involves active negotiations with the debtor in order to reach an agreement on payment of the creditor’s claims or other possible settlement options (e.g. return of goods, transfer of the debt to a third party, exchange of services or goods).

Interaction with the debtor begins immediately after sending a notice by mail, email, phone or instant messengers. This process involves intensive communication with the debtor in order to exert constant pressure. The main objective is to establish contact with key decision makers to achieve the fastest possible debt recovery.

The average time for informal extra-judicial collection is up to 60 days (except in cases where a debt repayment installment plan is agreed upon). If this stage does not bring the expected results or after an initial analysis it becomes clear that it is not applicable, it is necessary to proceed to collection through the court.

Before initiating judicial collection, it is worth paying attention to the limitation period. The general limitation period is 30 years. The limitation period for collecting interest on a loan is 5 years. The limitation period is interrupted if the debtor acknowledges the debt, expressed by the words or actions of the debtor. After the interruption, the limitation period begins to count anew.

The judicial procedure for debt collection in Indonesia is still governed by colonial documents, including the HIR (Herzien Inlandsch Reglement), which is used to guide civil proceedings in Java Madura and the RBG (Recht Reglement voor de Buiten Gewesten), which is used to guide civil proceedings outside Java Madura, as well as the Supreme Court of the Republic of Indonesia Regulation No. 2 of 2015 on the Simple Judicial Settlement Procedure (“Perma No. 2 of 2015”), which is used to handle small claims.

The judicial collection of a debt within Java Madura is effected by filing a statement of claim with the court, whereupon the clerk of the court makes an entry in the court register, and the presiding judge fixes a day and hour for the hearing of the case in the district court and orders both parties to be summoned to appear at the appointed time together with the desired witnesses for examination, as well as any documents they intend to use. When summoning the defendant, he must also be given a copy of the statement of claim with notice that he may, if he so desires, respond to the claim in writing.

If the defendant, despite due notice, fails to appear on the appointed day and fails to send his representative to the court, the claim will be satisfied by default, unless it is evident to the district court that the claim is contrary to law or is frivolous. The court, before rendering judgment, may order the debtor to be re-summoned to appear on another date which the presiding judge shall announce at the hearing to the party who has appeared. A defendant against whom a default judgment has been rendered and who does not agree with it may file an objection within 14 days from the date of notification of the judgment.

If both parties appear on the appointed day, the district court, through its chairman, will attempt to reconcile them. If reconciliation is achieved, an act must be drawn up at the court session, according to which both parties undertake to fulfill the agreement concluded. This document has the force and effect of an ordinary court decision.

If both parties appear, but reconciliation cannot be achieved, the court reads out the documents submitted by both parties and then hears the plaintiff and the defendant, decides on the need to call witnesses, involve experts and settle disputes regarding the documents submitted. If the case cannot be resolved at the first session, then the consideration of this case is postponed to the next nearest day of the session. If the case has been considered in such a way that all issues have become clear, the court holds a deliberation and makes a decision.

If one of the interested parties does not agree with the decision of the District Court, it may request a retrial in the High Court, which has jurisdiction in the relevant area. The request may be filed within fourteen days, starting from the day following the announcement of the decision to the interested parties. The decision of the High Court may be appealed to the Supreme Court of Indonesia within 14 days from the date of announcement of the contested decision.

The procedure for judicial collection of debt outside the territory of Java Madura, although regulated by a separate regulation, is the same in content as the procedure for judicial collection of debt within Java Madura.

The procedure for settling small claims applies to cases that arise from a breach of contract or an unlawful act, the value of which is less than or equal to 200,000,000.00 Indonesian rupiah. Once the judge has determined that the case should proceed as a small claims case, the parties to the dispute will be summoned to an initial hearing. At the initial hearing, the judge may invite the parties to reach an amicable settlement; however, if the parties fail to reach an amicable settlement, the proceedings will continue by serving the claim and quitclaim deed. The judge will make a final judgment within 25 days of the initial hearing. A party may not appeal to the High Court. Any challenge to a final judgment in the small claims procedure must be made to the Circuit Court that made the judgment. The challenge may be made within seven days of notice of the judgment. The trial will be based on examination of the documents only; there is no hearing or evidentiary procedure. The judgment must be made within seven days of the appointment of the panel. No further challenge by way of appeal, cassation or revocation is permitted.

Once the judgment has become final, the creditor should initiate enforcement proceedings. As part of the enforcement of a court decision, the creditor’s claims may be satisfied by seizing and writing off funds from the debtor’s accounts; seizing the debtor’s movable and immovable property with their subsequent sale; seizing and confiscating securities.

An alternative option for debt collection is to use bankruptcy proceedings. The creditor may file an application to declare the debtor bankrupt if the debtor has two or more creditors and does not pay at least one overdue debt that can be collected through the court. At this stage, if the debtor’s assets are insufficient to fully satisfy the creditors’ claims, it is possible to annul the debtor’s legal actions that were committed with the purpose of deceiving creditors. Annulment of legal actions is allowed if it is proven that at the time of the legal action, the debtor and the party with whom this legal action was committed knew or should have known that this action would lead to losses for creditors. Among such actions, it is necessary to highlight in particular: an agreement in which the debtor’s obligations significantly exceed the obligations of the party with whom the agreement was concluded; payments or provision of a guarantee for debt obligations that have not yet matured and / or that cannot be collected; transactions with related parties. As a result of the cancellation of such transactions, it is possible to return back to the debtor what he lost from such transactions and thereby increase the liquidation estate to satisfy the claims of creditors and cover the costs of implementing the bankruptcy procedure.

If you have any questions or need support on international debt collection in Indonesia, our company is ready to provide its expert assistance to effectively resolve your financial issue. Contact us to get additional information and professional support from specialists of the leading debt collection agency.

# DEBT COLLECTION AGENCY INDONESIA

30.09.2024

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