Bankruptcy is not merely synonymous with financial collapse; rather, it is a legal process designed to provide certainty, protection, and equitable solutions for both creditors and debtors. Pursuant to Article 1 paragraph (1) of Law Number 37 of 2004 concerning Bankruptcy and Suspension of Debt Payment Obligations (PKPU), bankruptcy is defined as a situation in which a debtor has two or more creditors and is unable to pay debts that are due and payable.
Legally, there are two parties entitled to file for bankruptcy, namely:
- The debtor himself/herself, who believes he/she is no longer able to fulfill his/her debt obligations.
- The creditor, whether an individual or legal entity, who holds a claim against the debtor’s debt and is able to prove the existence of more than one creditor and that the debt is due and payable.
Then, what if the person declared bankrupt is a State Civil Apparatus (Aparatur Sipil Negara/ASN)? Can bankruptcy directly affect their employment status?
As of now, there are no provisions within the prevailing laws and regulations, including Law Number 5 of 2014 concerning State Civil Apparatus, which explicitly state that bankruptcy status constitutes grounds for dishonorable dismissal of an ASN. In other words, an ASN declared bankrupt is not automatically removed from office.
However, indirect consequences may still arise. Bankruptcy status may affect:
- The assessment of personal integrity, which is one of the indicators within the merit-based system for ASN;
- Opportunities for promotion or appointment to a higher position, particularly when bankruptcy creates negative public perception or diminishes confidence in the professionalism of the ASN concerned.
In addition, another consequence of bankruptcy is the seizure and liquidation of the debtor’s assets by a court-appointed receiver (curator), which are subsequently used to repay creditors. However, a distinction must be made between the personal assets of the ASN and state-owned facilities utilized by the ASN.
Many ASNs utilize state facilities such as official residences, government vehicles, or other work-related equipment to support the performance of their duties. The question arises: can these assets be subject to seizure as part of the bankruptcy estate?
According to Article 50 letter d of Law Number 1 of 2004 concerning State Treasury, it is stipulated that: “No party is permitted to seize immovable assets and other proprietary rights belonging to the state/region.”
Therefore, official residences, government vehicles, and all work-related facilities owned by the state cannot be included in the bankruptcy estate as they are not legally owned by the ASN in a personal capacity. Only assets lawfully owned by the ASN as an individual—such as private residences, personal vehicles, or funds held in accounts under the ASN’s personal name—may be subject to seizure.
Although no provision expressly mandates the dismissal of an ASN solely on the basis of being declared bankrupt, the condition of bankruptcy nevertheless carries moral and reputational implications. Public trust and eligibility to occupy strategic positions may be impacted by such status. On the other hand, the law continues to provide protection for state-owned facilities used by ASNs to ensure that such assets are not wrongfully subjected to liquidation in the settlement of personal debts.