[Exclusive] Nearly 100,000 Duplicate Personal Rehabilitation Applications Under Moon Government... 2.5 Times Increase Compared to Previous 5 Years

96,149 Cases Over 5 Years
Sharp Increase to 146 Cases with 7 or More Filings
9,839 Cases of Duplicate Personal Bankruptcy Applications

[Image source=Yonhap News]

[Asia Economy Reporter Lee Hyun-joo] The number of cases applying for personal rehabilitation more than twice during the recent five years under the Moon Jae-in administration increased 2.5 times compared to the previous five years. Personal rehabilitation is a system that reduces a certain portion of debt burden only for individuals who have income but find it difficult to repay their debts. The previous administration's expansion of opportunities for personal rehabilitation to restore credit had a significant impact, but it has been criticized for encouraging moral hazard.

According to data received from the Supreme Court on the 25th by the office of Kim Do-eup, chairman of the National Assembly Legislation and Judiciary Committee and member of the People Power Party, the number of cases applying for personal rehabilitation two or more times from January 2017 to June 2022 was counted at 96,149. Considering that the number in the previous five years (2013?2017) was 38,873, this is more than double.

By frequency, applications for the second time were the most at 74,702 cases. This is more than twice the 30,804 cases from 2013 to 2017. Applications for the third time increased from 6,481 to 16,014 during the same period, and applications for the fourth time surged from 1,238 to 4,008. In particular, cases applying seven or more times increased significantly from 23 to 146 during this period.

The number of cases applying for personal bankruptcy, which fully cancels debts, two or more times in the recent five years also reached 9,839.

The background for the significant increase in personal rehabilitation and bankruptcy during the previous administration is largely attributed to the spread of COVID-19 and the rapid processing system for personal rehabilitation and bankruptcy implemented at that time. This system shortens the procedures for personal rehabilitation and bankruptcy to a minimum of three months, reducing costs and required documents. Related legal services can also be provided free of charge. The Moon Jae-in administration implemented policies to restore personal credit through rehabilitation, such as shortening the repayment period for personal rehabilitation from five years to three years.

However, it seems difficult to avoid criticism that the number of applicants for personal rehabilitation and bankruptcy has become excessively large. Concerns have also been raised that this could increase poverty and induce moral hazard. Kang Sung-jin, a professor of economics at Korea University, said, "An increase in personal rehabilitation or bankruptcy cases could mean that the number of people in poverty has increased, which may exacerbate social instability."

There is also a grim outlook that if moral hazard occurs where people who have applied for personal rehabilitation and bankruptcy once apply again, it could lead to overall financial sector insolvency.

Lawmaker Kim Do-eup said, "If the number of personal rehabilitation and bankruptcy cases increases, the possibility of it turning into a social problem also grows," adding, "The new start fund policy supporting small business owners and self-employed people worth 30 trillion won, promoted by the Yoon Suk-yeol administration, is expected to act as a buffer to some extent to prevent personal rehabilitation and bankruptcy."