Abstract
The Bankruptcy institutions are an extraordinary mechanism in debt settlement. The extraordinary characteristic distinguishes bankruptcy institutions with other mechanisms in debt settlement. This particular characteristic stems from the debtor’s inability to pay all of his debts due. However, two of the Indonesian bankruptcy laws do not include insolvency conditions as the basis for granting bankruptcy status to the debtor. Such legal politics resulted in the use of bankruptcy institutions deviated from their philosophy and vulnerable to abuse. With a post-positivist approach, this paper examines the position of insolvency tests on bankruptcy institutions, why insolvency tests are not carried out in Indonesian bankruptcy law, and how to place insolvency tests in Indonesian bankruptcy law. This study concludes that test insolvency is an essential element of bankruptcy institutions. Without insolvency tests, the bankruptcy institutions lose its raison d’etre. Proving that the debtor in insolvent condition cannot be done easily, so that Insolvency test is not used as a condition in granting bankruptcy status for debtors in Indonesia. Insolvency tests should serve as the basis for granting bankruptcy status to debtors by setting aside the principle of simple evidentiary systems. Thus, only by applying insolvency tests of bankruptcy institutions work properly.
Highlights
Bankruptcy is still become a nightmare in Indonesia
The number of legal loopholes is vulnerable to being misused. With all these problems the bankruptcy institution is increasingly unattractive to the community, an institution that is not rooted in the values and culture of Indonesian society
The Indonesian bankruptcy law states that the procedural law that applies to the bankruptcy process is a civil procedural law
Summary
Bankruptcy is still become a nightmare in Indonesia. The lack of petition for bankruptcy and controversy within the community regarding bankruptcy proves this assumption. Law No 37 of 2004 on Bankruptcy and Suspension of Debt Payment Obligation (Bankruptcy Law), as well as the previous bankruptcy legal regime, has so far been compiled by ad-hoc as a response to the economic crisis or a case that seizes public attention so that it cannot anticipate various problems in a bankruptcy process. The number of legal loopholes is vulnerable to being misused With all these problems the bankruptcy institution is increasingly unattractive to the community, an institution that is not rooted in the values and culture of Indonesian society. The drafting and amending process of the bankruptcy law which is only carried out in response to major cases and the economic crisis formed the legal politics of the Bankruptcy Law which emphasized on the protection of the creditors’ interests. Bankruptcy law here is seen as a set of rules which the validity will be influenced by other factors in society (law as it is in society)
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