"Declared 'No Money to Repay Debt'... 30,000 People in Q1 This Year (Comprehensive)"

Shinbokwi Supports 30,325 Debt Adjustments
5.2% Increase from Last Year's Q4
Rapid Debt Adjustments Surge 26%

[Asia Economy Reporter Kim Min-young] It has been revealed that more than 30,000 low-income individuals who could not repay their debts due to unemployment and business closures used the debt adjustment system in the first quarter of this year. The rapid increase in low-income individuals at risk of delinquency due to the impact of the novel coronavirus infection (COVID-19) turning to swift debt adjustment has drawn attention.

According to the Credit Recovery Committee on the 13th, the total number of debt adjustment cases supported by the committee in the first quarter of this year was 30,325. This represents a 23.3% increase over four years compared to the first quarter of 2016 (24,590 cases). It also increased by about 5% compared to the previous quarter, the fourth quarter of last year (28,897 cases).

By type, individual workouts targeting debtors who have been delinquent for more than 90 days amounted to 23,182 cases in the first quarter of this year. This is a 12.4% increase from 20,624 cases in the first quarter of 2016 and a 5.2% increase compared to 22,023 cases in the fourth quarter of last year.

Individual workouts apply to debtors whose total debt is 1.5 billion KRW or less (secured debt 1 billion KRW or less, unsecured debt 500 million KRW or less) and who have been delinquent on debts owed to creditor financial institutions for three months or more. If the Credit Recovery Committee's review board recognizes that the debtor has income above the minimum living expenses and is capable of repaying the debt, debt adjustment can be granted.

Pre-workouts, which provide interest rate debt adjustments for those delinquent between 30 and 90 days, saw 5,968 cases supported in the first quarter of this year. This is a sharp increase of 50.4% compared to 3,966 cases in the first quarter of 2016. It also rose about 4% compared to 5,942 cases in the previous quarter. Pre-workouts can be applied for only if the applicant's assets are 1 billion KRW or less.

What is more notable is the rapid increase in swift debt adjustments. There were 1,175 cases of swift debt adjustment in the first quarter of this year, a 26% increase from 932 cases in the fourth quarter of last year, and a staggering 382.3% surge compared to the third quarter of last year when the system was introduced.

Swift debt adjustment refers to a system where individual debtors who have been delinquent for 30 days or less, or have not yet become delinquent but are likely unable to repay, apply for debt adjustment. The number of cases increased steadily in January (354 cases), February (337 cases), and March (484 cases) of this year, when COVID-19 was spreading.

The Credit Recovery Committee stated, "People facing delinquency risks due to short-term income reductions caused by COVID-19, such as unemployment and business closures, are using this system." It appears that the financial authorities' introduction of rapid support programs for those at risk of delinquency, including six-month emergency repayment deferrals and 10-year installment repayments as part of COVID-19 financial support, has also helped raise awareness of this system.

The future looks even more problematic. For low-income individuals, debt adjustment is a "last resort" taken when they can no longer bear the burden of debt, and it is obvious that the difficulties of the low-income economy will peak further from the second half of the year due to COVID-19. In 2016, 73.5% of individual workout applicants had a monthly income of 1.5 million KRW or less. A Credit Recovery Committee official said, "Debtors knock on the committee's door after breaking insurance or savings deposits, using card loans, or borrowing money from savings banks or loan companies and then failing to repay." He expressed concern that "applications for debt adjustment due to the impact of COVID-19 may surge further in the second half of this year or next year."

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