Debt disputes best dealt with out-of-court: Lawyer

Debt disputes best dealt with out-of-court: Lawyer

JAKARTA (JP): Out-of-court settlements are the best way to
deal with debt disputes, according to legal experts.

Lawyer Rasyim Wiraatmadja said here on Wednesday that taking
debt claims to the commercial court, even though the new
bankruptcy law makes the process much easier now, would still
result in a long negotiation process before the debtor is
declared bankrupt.

Creditors and debtors should therefore first settle their
conflicts out of court, he said. Although the court will allow
the debtor to renegotiate its debt with the creditor before
initiating bankruptcy proceedings, the result will be much better
if the negotiations are carried outside the court's jurisdiction,
he said.

"If all debt defaulters are taken to court, you can imagine
how many companies will be declared bankrupt. This will certainly
add to the escalating unemployment problem," Rasyim said.

Amir Syamsuddin, another lawyer, said the sharp depreciation
of the rupiah against the U.S. dollar and the high interest rates
imposed by the government to stabilize the currency had hit all
business activities severely.

"With a weak rupiah and high interest rates, almost all
companies are facing difficulties in paying their debts both to
foreign and local banks. This means that 90 percent of the
companies in the country are technically bankrupt," he said.

"If the companies are brought to the commercial court and
declared bankrupt, just calculate how many people will lose their
jobs."

Amir said an out-of-court settlement should be the preferred
alternative because it would not only prolong the life of ailing
companies but also eliminate the social problems that might arise
from business closures.

The International Labor Organization (ILO) warned early this
month that an average of almost 15,000 Indonesians would lose
their jobs every day this year and that two out of three
Indonesians were likely to be living below the poverty line next
year.

The ILO predicted that 5.4 million Indonesian people would be
fired by the end of this year due to the country's prolonged
crisis.

Rasyim and Amir noted that the soaring unemployment coupled
with the escalating number of people living below the poverty
line would adversely affect the government's efforts to improve
the country's battered economy.

The Indonesian government enacted the ambitious new bankruptcy
law on August 20 to replace an antiquated law which had been in
place since the beginning of the century.

Under the new law, the proceedings have to begin within 30
days of the suit being lodged and any appeal should be heard
within 30 days after bankruptcy is declared.

However, a debtor is given 270 days to renegotiate with
creditors before the court starts the bankruptcy proceedings,

Given the number of companies in Indonesia that are
practically insolvent, analysts say that there would be a
stampede of companies to the bankruptcy courts.

But there have been only five bankruptcy claims filed to the
Jakarta Commercial court so far with three of them having already
held their first hearings.

"The bankruptcy law is still new here, we do not yet know its
prospects in the future," Amir contended. (aly)