There are four legal avenues that a creditor can take against a debtor to recover a debt.
A loan can be given under a written or verbal agreement. It is not wise to extend loan based solely on a verbal agreement because this is open to dispute when it comes to taking legal action.
Set out below are four possible legal options to recover the debt
Demand letter (locally known as Somasi)
Demand letter will inform the debtor of the debt which the debtor has neglected to repay. The demand letter therefore also serves as record of the debt relationship and the amount outstanding – serving as a record in case it becomes necessary to escalate to a law suit in court. If the debtor ignores the letter, then it may be necessary to escalate to a civil law suit.
Civil Claims to the District Court
Civil Action in the District Court is a follow-up measure if the debtor still ignores the written demand or warning by the creditor. Article 1243 of the KUHper (Civil Code) provides that if the debtor neglects to fulfill his debt obligations, the law suit for default or enforcement of the obligations can then be filed provided that the debtor has been warned previously.
IMPORTANT : Before engaging lawyers to file court action, it is important to investigate whether there is any asset owned by the debtor. Using private investigators is an option.
Submitting an Application for Bankruptcy Declaration
Although this is possible, there is the requirement that the application for bankruptcy must be supported by two or more creditors. A pre action letter is still necessary. A threat of bankruptcy usually weighs heavier on the debtor than a threat of civil law suit. This is because the entire business of the debtor will be directly impacted if a bankruptcy order is made and this may trigger cross default under the contractual obligations in some of the banking facilities.
Please see this page for information on bankruptcy.
CRIMINAL COMPLAINT
Ordinarily, a default by a debtor results in civil claim or right to file bankruptcy. This is confirmed in article 19(2) of Law 39 of 1999 relating to Human Right:
No one on the basis of a court decision may be sentenced to imprisonment or imprisonment based on reasons of inability to fulfill an obligation in the debt agreement.
However, if it can been shown that there is some element of fraud, then the creditor can consider filing a criminal complaint with the view of implicating the debtor. The basis for this is Article 378 of the Indonesian Penal Code
Article 378
Any person who with intent to unlawfully benefit himself or another, either by assuming a false name or a false capacity, or by crafty artifices, or by a web of fictions, induces someone to deliver any property or to negotiate a loan or to annul a debt, shall, being guilty of fraud, be punished by a maximum imprisonment of four years.
The rationale for filing criminal complaint is that the psychological effect is the greatest using the police investigation process than filing civil law suit or bankruptcy.
Once the police is involved, there is likely to be an even stronger pyschological effect on the debtor. Where the police accepts the complaint, the debtor may be summoned to be questioned by the police. This is useful leverage to have the debtor fulfill his or her debt obligations. Examples of fraud could be that the debtor has misrepresented on his financial standing or credit worthiness to induce the loan from the creditor.
The above options means use of a lawyer. To justify the legal spend, there should be some prospect of recovery in full or to a significant extent. The most important part is to gather some intelligence on assets that the debtor may own.