ALL ASSETS OWNED BY DEBTOR CAN BE USED AS COLLATERAL FOR DEBT PAYMENT
“All assets of the debtor, either present or future, can be used to paid the debt of debtor.”
In an agreement which incurs debt between parties, the creditor will generally ask debtor to submit collateral. This collateral is used to “save” creditor if, in the future, the debtor is unable to fulfil his obligation.
Such collaterals are known as general collateral and special collateral. The special collateral consists of material collateral and personal guarantee.
In a loan agreement whose nominal value is not too high, the debtor generally does not provide a specified guarantee. If the debtor is negligent in paying his debt, what is the legal protection for the creditor to receive his payment?
Definition of general collateral is set under Article 1131 of Indonesian Civil Code:
“All movable and immovable assets of the debtor, either present or future, serve as securities for the personal obligations of the debtor.”
Thus, all assets owned by debtor, in accordance with the law, are automatically serve as guarantee to pay his debt to the creditor.
Nevertheless, aforesaid creditor has to follow the applicable legal procedure to receive his payment. The creditor can not take debtor’s aset immediately by force, for example, taking the debtor’s car.
If it is done, it will create a new legal issue, wherein the creditor can be reported to the police with alleged theft.
Therefore, to obtain his right, the creditor must file a lawsuit against the debtor through the court. In his claim as a plaintiff, the creditor need to ask the court to impose confiscation (conservatoir beslag) of the debtor’s assets. So that after the court ruling has permanent legal force and the debtor is still negligent, the confiscated aset may be auctioned off. Its result becomes the right of the creditor in accordance with the debt value.
Thus, before deciding to file a lawsuit on breach of contract, the creditor must have the correct and complete datas concening the assets of the debtor which are deemed useful to be confiscated, so the creditor will receive his payment for the debt.
What if the debtor has more than one creditor?
This happens in bankruptcy cases, wherein the debtor who is declared bankrupt by the court has more than one creditor. In fact, it is common for all creditors to be the concurrent creditors (creditors who do not have material guarantee).
In that case, Article 1132 of Indonesian Civil Code will be applied:
“The assets serve as joint guarantee for his creditors; the proceeds thereof is to be divided among the creditor in proportion of their loan, unless there are legal order of priority among the creditors.”
All creditors without material guarantee have equal rights and position of the assets of the debtor. Hence, bankruptcy is known as general confiscation of all assets of the debtor.
Fairus Harris, S.H., M.Kn.