Conflicting Norms Between Bankruptcy and Collateral Laws

 
Happy Rayna Stephany, Andin Aditya Rahman
 
The  conflicting norms contained in bankruptcy laws and collateral security laws and how to resolve them continue to be point of debate between academics and practitioners. The discussion encompasses consideration of the rights of secured creditors, which are frequently sidelined in bankruptcy cases.
 
Yulianto, a Surabaya-based a bankruptcy lawyer, stated that creditors holding collateral over assets of their debtors (commonly referred to as secured creditors) are frequently put in a disadvantageous position under current Indonesian bankruptcy laws.
 
“This is apparent from two things, namely inconsistencies of bankruptcy law norms themselves and norms relevant to the settlement of bankruptcy assets that are applied to collateral,” he explained to Hukumonline during a seminar at the Faculty of Law, Airlangga University, in Surabaya on Monday.
 
He elaborated possible inconsistencies under Law No. 37 of 2004on Bankruptcy and Suspension of Debt Payments, such as Articles 55 and 56. Article 55 states that secured creditors can immediately execute their collateral, while Article 56 states that this must be done in 90 days.
 
There is also the problem of employee wages having a higher priority over the rights of secured creditors when settling bankruptcy assets. Mr. Yulianto perceives this as reducing the rights of secured creditors.
 
“It’s a matter of attitude. In my practice, I advocate for secured creditors and because of that I receive many lawsuits,” admitted Yulianto.
 
When asked about the lex specialist derogate lex generalis (specific provisions take precedence over general provisions) principle, Mr. Yulianto commented that bankruptcy laws take precedence over collateral laws. However, this should not reduce the rights of secured creditors.
 
“The rights of secured creditors cannot be reduced. If they are reduced, collateral laws will not have meaning anymore,” he concluded.
 
In response to Yulianto’s opinion, M. Hadi Subhan, lecturer at the Law Faculty of Airlangga University, asserted that if there are contradictions between bankruptcy laws and collateral laws, the principles and provisions of bankruptcy laws should take precedence over those of collateral laws. This again is based on the lex specialist derogate lex generalis principle.
 
According to Mr. Subhan, bankruptcy laws are parable to emergency laws for collecting debts. Due to their emergency nature, bankruptcy norms exempt standard laws and regulations.
 
“It will exempt standard laws, including collateral laws, corporate laws, and labor laws. If these laws are complied with entirely, bankruptcy will not ever occur,” he explained.
 
Related to the notion of reduced rights of secured creditors, Mr. Subhan suggested that individual creditors should not be greedy. Other than secured creditors, bankruptcy assets must be shared with other creditors based on the principle of pari passo pro rata parte, which dictates bankruptcy assets are guarantees jointly owned by creditors and must be proportionally shared.
 
(hot/kc)