Debt Compromise Agreement Template for Indonesia

A Debt Compromise Agreement is a legally binding contract that allows you to resolve outstanding debts through negotiated settlement rather than pursuing full payment of the original amount. Under Indonesian law, this document enables both debtors and creditors to reach mutually acceptable terms that provide debt relief while ensuring some level of recovery for creditors.

When do you need this document?

You need a Debt Compromise Agreement when facing financial difficulties that prevent full debt repayment, or when you're a creditor seeking to recover at least partial payment from a struggling debtor. This document is particularly valuable in post-pandemic business recovery situations, corporate restructuring scenarios, or when personal financial hardship makes original payment terms impossible to meet. Many Indonesian businesses have used these agreements to navigate economic uncertainties while maintaining important supplier and customer relationships. The agreement is also essential when multiple creditors are involved and you need to establish clear priority and payment structures.

Key legal considerations

Under Indonesian Civil Code Book III, your debt compromise must include specific elements to be legally enforceable. You must clearly identify all parties, provide detailed background of the original debt, and specify the exact compromise amount and payment terms. The agreement should include mutual release clauses that protect both parties from future claims related to the settled debt. Consider including default provisions that specify consequences if the debtor fails to meet the new payment terms. If guarantors or security providers are involved, their consent and release terms must be explicitly addressed. You should also consider the tax implications of debt forgiveness, as the compromised amount may be treated as taxable income under Indonesian tax law.

Legal requirements in Indonesia

Indonesian law requires that debt compromise agreements comply with Civil Code provisions on obligations and contracts. If your agreement involves financial institutions, it must also comply with Financial Services Authority (OJK) Regulation No. 11/POJK.03/2015 regarding debt restructuring activities. Consumer debtors receive additional protection under Law No. 8 of 1999 on Consumer Protection, which ensures fair treatment and prohibits unfair debt collection practices. For corporate debtors at risk of insolvency, the agreement should reference Law No. 37 of 2004 on Bankruptcy to ensure compliance with debt restructuring frameworks. The document must be executed properly with authorized signatories, and depending on the amount involved, may require notarization by a licensed Indonesian notary public. Corporate parties must ensure their representatives have proper board resolutions authorizing the compromise agreement.