General Rehabilitation System

If a debtor is an individual business owner and the total amount of debt exceeds 1 billion KRW for unsecured debt or 1.5 billion KRW for secured debt, the debtor can change the rights without limit on the debt cap if the creditor agrees under certain conditions. The effect of the rights change will be recognized after obtaining the approval of the creditors.

The repayment period is 5 years, and the debtor needs to repay the agreed amount on December 31 of each year for up to 10 years. However, in normal cases, the discharge of the debt will only occur once the reduced debt has been fully repaid.

In the personal rehabilitation procedure, even if a court approval is given, a secured creditor's auction (voluntary auction) can still proceed. However, in the general rehabilitation procedure, the rights of the secured creditors can be changed.

In cases where a debtor cannot proceed with the personal rehabilitation procedure, the rehabilitation process will be carried out following the same steps as corporate rehabilitation, except for the issues specific to corporations. Therefore, general rehabilitation can be considered the corporate rehabilitation process. Currently, this system is mainly used by professionals such as doctors, Oriental doctors, lawyers, architects, individual entrepreneurs, and entertainers. Employees with large debts, including civil servants, teachers, clerics, and company administrators, can also use this system.

For individual business owners, a new simplified rehabilitation procedure was introduced starting from July 1, 2015. If the total debt (rehabilitation claims, rehabilitation secured claims) does not exceed 5 billion KRW, a simplified rehabilitation procedure for small business income earners is available.

The simplified rehabilitation procedure addresses the issue that regular rehabilitation procedures are time-consuming and costly, even for those with simple debt and credit relationships. In the simplified procedure, the duties of the investigating officer are simplified, and the requirements for approval are relaxed. A "business income earner" refers to a debtor who may continue to earn income from real estate rental, business, agricultural, or forestry activities, or other similar sources of income in the future.

The main differences or advantages of the simplified rehabilitation procedure compared to the regular rehabilitation procedure include the appointment of a simplified investigating officer to carry out the investigation in a simplified manner. This leads to lower pre-payment costs for the investigating officer's fees compared to regular cases. Additionally, in terms of creditor approval requirements, the previous approval conditions (three-fourths approval from secured rehabilitation creditors, two-thirds approval from rehabilitation creditors) are relaxed. It is now sufficient to obtain the agreement of creditors holding more than 50% of the total voting rights of rehabilitation creditors and a majority of the creditors with voting rights to meet the conditions for approving the rehabilitation plan.

Bucheon Personal Rehabilitation Lawyer

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