Dealing with excessive debt can be overwhelming, but there are options available to help individuals manage their financial burden. One such option is the debt restructuring program offered by both private and government entities.
- Public Programs: Public programs include individual rehabilitation and bankruptcy, which are determined by the court.
- Private Programs: Operated by the Credit Rehabilitation Committee, private programs include swift debt restructuring, pre-workout, and individual workout.
Credit Rehabilitation Committee's Debt Restructuring Program:
There are three types of programs under this committee, and they share some common eligibility criteria:
- New debts accumulated within 6 months of applying for the debt restructuring program should not exceed 30% of the total debt.
- The total debt from financial institutions should be within 1.5 billion won (secured loan limit of 1 billion won and unsecured loan limit of 500 million won).
- There is a 50,000 won application fee, and once applied, debt collection activities are halted immediately.
1. Swift Debt Restructuring (for 30 days or less overdue debts):
This program is beneficial for those experiencing temporary financial difficulties. While the principal amount remains unchanged, the overdue interest can be reduced. The interest is capped at 15% annually (10% for credit cards), so if the original interest rate is higher, it can be lowered. Repayment can be deferred up to 3 years in 6-month intervals, but a longer repayment period may lead to higher initial interest burden.
2. Pre-Workout (for 31 to 89 days overdue debts):
Pre-workout is suitable for those who can manage long-term installment payments or have temporary financial constraints. The interest rate is determined based on the borrower's repayment capacity, ranging from 3.25% to 8%, which is 30-70% of the original contracted interest rate. The repayment period is within 10 years. This program is beneficial for credit recovery as overdue records are not left on the credit history.
3. Individual Workout (for 90 days or more overdue debts):
Ideal for long-term installment payment after debt restructuring, this program offers a reduction in overdue interest and even principal, up to 70% (or 90% for socially vulnerable groups like disabled individuals or low-income earners). The remaining debt must be repaid within a maximum of 10 years (or 35 years for secured debts). However, individual workout leaves a public record of overdue debts on credit history, which can be removed if the borrower faithfully repays for two years.
Credit Rehabilitation Committee Consultation:
To avail of these programs, individuals can contact the Credit Rehabilitation Committee through various channels such as phone consultation, in-person visit to regional centers, or online consultation.
👉 Telephone consultation: Call center 1600-5500
👉 Visiting Counseling: National Minority Finance Integrated Support Center
👉 Internet Counseling: Credit Recovery Committee Cyber Counseling Department (cyber.ccrs.or.kr) or Credit Recovery Committee App
Court Debt Restructuring Program:
For debts beyond financial institutions, such as private loans, guarantees, or tax arrears, individuals need to resort to court-administered debt restructuring. It offers more significant debt reduction than private programs, but the process takes longer and incurs legal expenses. Two options are:
1. Individual Rehabilitation:
For those with steady income, they can repay a certain amount (excluding living expenses) for 3 to 5 years, after which the remaining debt is discharged. However, a record of debt non-payment will remain for five years.
2. Personal Bankruptcy:
When a person is unable to repay their debts in full, bankruptcy divides their assets fairly among creditors. Up to 70% of the debt (or 90% for socially vulnerable groups) can be written off, but the bankruptcy process affects various aspects of one's life, including job opportunities and eligibility for certain positions.
It is crucial to carefully consider available options, eligibility criteria, and potential consequences before choosing a debt restructuring program to manage financial difficulties effectively.