THE URGENCY OF APPLYING THE INSOLVENCY TEST AS A REQUIREMENT FOR BANKRUPTCY PETITIONS IN INDONESIAN BANKRUPTCY LAW

Maniah (Universitas Batam)
Erniyanti (Universitas Batam)
Adnan Suhardis (Universitas Batam)

Multidiciplinary Output Research for Actual and International Issue (Morfai Journal)
Vol. 6 No. 6 (2026): Multidiciplinary Output Research For Actual and International Issue

Article 2(1) of Law Number 37 of 2004 on Bankruptcy and Suspension of Debt Payment Obligations requires only that a debtor has two or more creditors and has failed to pay at least one debt that is due and payable. Both requirements can be established through summary proof, so a debtor whose assets far exceed its liabilities may still be declared bankrupt. This study examines these weaknesses and considers why and how an insolvency test should be introduced. It uses normative legal research with statutory, conceptual, and comparative approaches, drawing on Australia, the United States, the Netherlands, and Germany. Without an insolvency test, creditors can use bankruptcy as a debt collection tool against solvent debtors. The law determines insolvency only after the bankruptcy declaration, under Article 178(1), which reverses the logical order. The comparator jurisdictions assess whether the debtor is generally unable to pay through a cash flow test, a balance sheet test, or both before opening proceedings. The study recommends amending Articles 2(1) and 8(4) to make the cash flow test the primary requirement and the balance sheet test a supplement, with examination by a court-appointed independent public accountant and a simpler procedure for micro, small, and medium enterprises.