Ministry of Justice to Expand Simplified Rehabilitation System Scope for SMEs Affected by COVID-19 Impact

[Asia Economy Reporter Kim Hyung-min] The Ministry of Justice is pushing for legislation to expand the eligibility for the simplified rehabilitation system to support small and medium-sized enterprises (SMEs) struggling with economic difficulties caused by the COVID-19 pandemic.

On the 6th, the Ministry of Justice announced a draft partial amendment to the Enforcement Decree of the Debtor Rehabilitation and Bankruptcy Act, which includes expanding the debt limit for small business income earners eligible for the simplified rehabilitation system from the current "up to 3 billion KRW" to "up to 5 billion KRW."

The simplified rehabilitation system is stipulated in the Debtor Rehabilitation and Bankruptcy Act. This system is designed to allow small business income earners to rehabilitate quickly at a low cost. Compared to the general rehabilitation procedure, it requires less procedural cost and time (on average about 180 days from application to approval decision).

A Ministry of Justice official stated, "With this amendment, we expect that more SMEs or SME managers will be able to rehabilitate quickly at a lower cost through the simplified rehabilitation procedure."

Based on cases filed at courts nationwide from 2016 to 2018, applications for the simplified rehabilitation system accounted for about 30% of all rehabilitation cases.

The Ministry of Justice projected that if the debt limit is expanded to 5 billion KRW through this amendment, approximately 48% of rehabilitation cases at the Seoul Rehabilitation Court over the past five years would be eligible to use the simplified rehabilitation procedure.

This content was produced with the assistance of AI translation services.