In Indonesian bankruptcy proceedings, the treatment of third-party assets pledged as collateral for a debtor’s debt has long been a source of legal uncertainty. Conflicting court interpretations have left creditors, guarantors, and debtors facing unpredictable outcomes, particularly regarding whether such assets could be considered part of the bankruptcy estate.

In their analysis, Dentons HPRP’s Managing Partner Sartono, together with Leonardo Richo Sidabutar (Senior Associate) and Salwa Azzahra Fadilah (Associate), examine the implications of Supreme Court Circular Letter No. 2 of 2024 (SEMA 2/2024), which seeks to resolve this issue by affirming that third-party assets generally fall outside the bankruptcy estate—though with an important caveat that may still invite differing interpretations.

Drawing on their deep experience in bankruptcy and restructuring matters, the authors provide a practical assessment of how SEMA 2/2024 reshapes the treatment of third-party collateral and the remaining grey areas that practitioners must navigate. Their insights not only clarify the current position under Indonesian law but also highlight the need for more definitive guidance to ensure consistency and fairness in future cases—particularly in protecting third-party interests while maintaining the integrity of the bankruptcy process.

Read the full article here. [English | Indonesia]

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