DIFFERENCES BETWEEN LAWSUIT ON BREACH OF CONTRACT AND PETITION FOR BANKRUPTCY

 In Legal Updates

“Lawsuit on breach of contract or petition of bankruptcy may be filed by the creditor to receive his payment.”

Loan agreement made by the parties is often not proceeding as initally agreed upon. The debtor can not always pay his debt in accordance with the provisions under the agreement.

Under such circumstances, there are two legal options with two differents legal consequences for a creditor to find a way out:

Lawsuit on Breach of Contract
Lawsuit on brech of contract is filed by one of the creditor against his debtor in order to receive his payment. If the panel of judges decided to grant his claim, the court ruling will only be applicable to the aforesaid creditor, the creditor who acted as a plaintiff.

In addition to receive his payment, the creditor may demand to confiscate assets of the debtor.

So if after the court ruling, the debtor is still negligent to pay his debt, the creditor may ask for execution for specified assets which have been confiscated by the court ruling.
Execution of consfiscation can only be made to the specified assets as stated in the court ruling. The result of execution is intended only to pay the concerned creditor.

Petition for Bankruptcy
In filing a petition for bankruptcy, please ensure the main thing: that the debtor has two or more creditor whose debt is unpaid, has matured and became payable. (Read also: Important Things to Look for in Filing a Petition for Bankruptcy to the Commercial Court)

Aforesaid conditions are not required in filing lawsuit on breach of contract.

Another thing that distinguishes the lawsuit on breach of contract and petition for bankruptcy is that declaration of bankruptcy is applicable for all creditors of the bankrupt debtor. Although not all creditors act as an applicant of petition for bankruptcy.

Within maximum five days period after declaration of bankruptcy is received by the appointed curator and supervisory judge, the curator has to announce the declaration of bankruptcy, at least, in two daily newspaper.

The announcement includes the creditors’ meeting, the deadline for filing the claims by creditors and the creditors’ meeting for the verification of receivables and claims. This announcement intends to make other concerned creditors aware of the existence of the declaration of bankruptcy.

So the creditors can get involved in the bankruptcy process in the future, provided that the creditors has filed the claims and received by the curator during the scheduled creditors’ meeting for the verification of claims.

In the bankruptcy process, the settlement of bankruptcy assets will be done for all assets of the debtor, knwon as boedel pailit. Settlement of bankruptcy assets means that confiscation and execution will be done, and the result of execution will be used to repay the debt of the bankrupt debtor.

Therefore, the execution of lawsuit on breach of contract is done only for the interest of the plaintiff. This does not apply to the execution in bankruptcy case.

All creditors has the equal rights of the bankruptcy assets to receive payment for the debt, as long as there is no other reasons to be prioritized.

BP Lawyers can help you:
We can assist you in providing the best solution to the legal program of your business or your company’s.  You can contact us via bpl@smartlegal.id or +62821-1234-1235

Author :
Fairus Harris, S.H., M.Kn.

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