SUMMARY
The concept of non-performing loan settlement as stipulated in the banking legal system in Indonesia, especially settlement through litigation in court, is not in accordance with the demands of efficiency in the business world and the dynamics of national economic development. The concept of bad credit settlement based on German banking law reflects an indication of the level of efficiency in accordance with the demands of the business world. The German Insolvency Act (GIA) Bankruptcy Law provides a model how to efficiently solve problematic loans for the exemption of debtors' debts. The application of "good behavior" (wohlverhaltensperiode), will free a person from his debt to the benefit others, and this will bring the debtor back on the path of "right" financial behavior is potentially more beneficial than offering some alternatives to creditors, debtors and the public. The comparison of concept of the bad credit settlement system between Indonesian banking law and German banking law is useful. The settlement of bad credit with Indonesian banking law is very inefficient, requires a long time, labor and costly (often requiring more than 1 decade. In comparison, the German banking system concept can reflect an indication of a high level of efficiency according to the demands of the business world, both in terms of energy efficiency, time and low costs. We hypothesize that the non-performing loan settlement model can be carried out by increasing the function and authority of the State Wealth and Auction Service Office (KPKNL) as the State Representative in arranging and coordinating restructuration process in both management and managerial at the time of non-performing loans. Doing so will be more efficient and effective and gives legal certainty in protecting the privelegesof banks as separatist creditors to get a share.