When a Debtor Is Declared Bankrupt: What Creditors Need to Know to Secure Their Rights

A bankruptcy declaration against a debtor often raises immediate concern for creditors, particularly regarding the recoverability of outstanding receivables. However, under Law No. 37 of 2004 on Bankruptcy and Suspension of Debt Payment Obligations (the “Indonesian Bankruptcy Law”), bankruptcy does not signify the end of a creditor’s rights. Instead, it establishes a structured legal framework through which creditors may actively protect and pursue their claims under court supervision.

One of the most critical consequences is that once a debtor is declared bankrupt, creditors are no longer permitted to pursue individual collection or enforcement actions against the debtor. This principle is expressly reflected in Article 24, paragraph (1), of the Indonesian Bankruptcy Law, which provides that, as of the date the bankruptcy decision is declared, the debtor loses the authority to manage and sell its assets.

From that moment, all assets part of the bankruptcy fall under the control of a Receiver appointed by the Commercial Court, acting under the supervision of a supervisory judge. Accordingly, any attempt by creditors to pursue claims through separate lawsuits, demand letters, or individual execution measures becomes legally impermissible. All creditor claims must instead be asserted and resolved exclusively through the bankruptcy proceedings as outlined in Article 27 of the Indonesian Bankruptcy Law.

• Filing Claims

The first and most critical step for creditors is to submit their claims to the Receiver. Article 113 of the Indonesian Bankruptcy Law requires creditors to file their claims for verification. Only claims that are properly submitted and verified will be recorded in the list of acknowledged claims and become eligible for payment from bankruptcy assets. The submission must clearly set out the legal basis of the claim, the amount of debt, and be supported by sufficient documentary evidence.

Claims must be submitted within the period determined by the Receiver. If a creditor fails to submit its claim within such prescribed period and submits its claim after the expiration thereof, such creditor shall only be entitled to receive payment after all creditors who have timely submitted their claims have been fully satisfied.

Notwithstanding the foregoing, if a creditor fails to submit its claim altogether, such creditor shall not be entitled to receive any distribution from the debtor’s assets.

• Participation in Claim Verification

Following submission, creditors should actively participate in the claim verification meeting. During this process, creditors are entitled to defend the validity and amount of their claims. They may raise objections against claims submitted by other creditors that are deemed unfounded or improperly supported. The outcome of the verification meeting is decisive, as it determines whether a claim is accepted in full, partially accepted, or contested.

• Understanding Creditor Classification

Creditors must also carefully assess their legal standing and classification. The Indonesian Bankruptcy Law distinguishes between secured creditors (separatis), preferred creditors (preferen), and concurrent creditors (konkuren), each with different implications for repayment. Secured creditors, pursuant to Article 55 paragraph (1), in principle retain the right to enforce their security interests independently, subject to the stay period provided under Article 56. Preferred and concurrent creditors, on the other hand, depend on the proceeds of the liquidation and the statutory order of priority.

• Right to Access Information

Creditors are entitled to obtain information from the Receiver regarding the status of the debtor’s assets throughout the bankruptcy process. Upon request, the Receiver is obliged to provide updates concerning the management, sale, or liquidation of the bankruptcy assets, including the progress and outcomes of such asset dispositions. This right ensures transparency in the administration of bankruptcy assets. It enables creditors to monitor whether the liquidation is conducted in accordance with applicable bankruptcy laws and the principles of fairness and accountability.

• Supervising the Receiver 

In addition to participating in the core bankruptcy process, creditors also have the right to supervise the Receiver’s actions. Article 69 of the Indonesian Bankruptcy Law holds the Receiver accountable for the management and liquidation of the bankruptcy assets. Creditors may submit objections to the supervisory judge if there are indications of negligence, misconduct, or actions that could prejudice the assets and, consequently, the creditors’ interests (Article 77).

• Distribution of Claim

For creditors, it is important to understand that the recognition of a claim does not automatically result in immediate payment. Under the Indonesian Bankruptcy Law, creditors will receive payment only from bankruptcy assets if and when sufficient funds are available, as determined by the Supervisory Judge. Article 188 provides that the curator may only be instructed to distribute payments after the judge is of the view that there is adequate cash for distribution. In practice, this means creditors must wait until the curator has completed the settlement and liquidation of the debtor’s assets. 

Furthermore, pursuant to Article 189, any distribution must be preceded by the preparation of a distribution list, which requires approval from the Supervisory Judge and sets out in detail the verified claims, applicable expenses, and the portion payable to each creditor. This highlights that, for creditors, securing recovery depends not only on filing and verifying claims, but also on the actual realization of assets and the court’s approval of the distribution process.

Conclusion

When a debtor is declared bankrupt, creditors are no longer allowed to pursue payment individually and must follow the bankruptcy process established by law. Although this shifts control to the court-appointed Receiver, the system is designed to ensure that the debtor’s assets are managed transparently and distributed fairly among creditors. Creditors who promptly file their claims, understand their legal position, stay informed about the handling and sale of assets, and actively monitor the Receiver’s actions are better positioned to protect their interests and maximize potential recovery within the bankruptcy framework.

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Contributor: Isabela Winita - Legal Associate