[Jeon Daegyu's 7 Wins 8 Losses] Can Immunity Be Granted Again After Being Granted Once?

Mr. Kim, who ran a small restaurant in Seoul, was unable to manage his increasing debts due to the aftermath of the 2008 global financial crisis, so he closed his restaurant and filed for personal bankruptcy at the Seoul Central District Court around November 2010. Fortunately, the process proceeded smoothly, and he received a discharge decision from the court on January 15, 2012, which was finalized on January 29. After being discharged, he persevered and took over a new restaurant, renovated it, and resumed operations. However, due to the difficulties caused by the COVID-19 pandemic last year, he considered filing for bankruptcy again. Can Mr. Kim receive a discharge again through the personal bankruptcy process?

The "Debtor Rehabilitation and Bankruptcy Act" stipulates that allowing a debtor to repeatedly receive discharge harms the interests of creditors and poses a risk of abuse of the discharge system by the debtor, so discharge cannot be granted unless a certain period has passed. If a debtor has previously received a discharge through a personal bankruptcy procedure, they cannot receive another discharge until 7 years have passed from the date the discharge decision was finalized. If the previous discharge was obtained through a personal rehabilitation procedure, 5 years must have passed before another discharge can be granted. Debtors who received discharge through personal rehabilitation are given a 2-year benefit compared to those who received discharge through personal bankruptcy. The 2-year benefit in personal rehabilitation reflects the fact that at least a small amount was repaid to creditors in that procedure.

Where does the 7-year (5-year) discharge restriction period come from? The system originated in the United States, where an individual had to wait 7 years before filing for bankruptcy again after a previous filing (this was extended to 8 years starting in 2005). The 7 years is said to be derived from the Bible. When Moses established the law, he set the liberation of slaves due to debt every 7 years. Deuteronomy 15:1-2 states, "At the end of every seven years you shall grant a release. And this is the manner of the release: every creditor shall release what he has lent to his neighbor; he shall not exact it of his neighbor or his brother, because the Lord's release has been proclaimed." This is the basis for the rule.

In Mr. Kim's case, there is no problem receiving discharge if he files for bankruptcy this year. Since the discharge finalization date from his previous personal bankruptcy procedure was January 29, 2012, more than 7 years have already passed. If Mr. Kim files for personal bankruptcy (filing for personal bankruptcy is considered as also applying for discharge unless the applicant objects) and there are no other reasons for denial of discharge such as waste or concealment of assets, he can receive discharge. If Mr. Kim had received discharge in 2015, he would not be able to receive discharge in principle if he filed for bankruptcy as of 2021 because 7 years would not have passed yet. However, like other reasons for denial of discharge, the 7-year discharge restriction period does not absolutely exclude discharge, and discretionary discharge is possible even if this period has not elapsed. The court may decide to grant discharge considering various factors such as the cause and increase of the debt, the degree of repayment efforts, the current living conditions of the debtor and their family, the debtor's motivation for economic rehabilitation, and the prospects for rehabilitation. Ultimately, even if Mr. Kim received discharge in 2015 and 7 years have not passed, there is still a possibility of receiving discretionary discharge from the court.

Jeon Dae-gyu, Chief Judge, Seoul Rehabilitation Court