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)