[Jeon Daegyu's 7 Wins 8 Losses] Liberation from Debt

When did debt first arise? Perhaps it has existed since the moment humanity appeared on Earth. Wealth inequality has persisted throughout history, inevitably creating borrowing relationships involving money among people. In the past, failure to repay debt could result in imprisonment or enslavement. Shakespeare’s "The Merchant of Venice" vividly illustrates how harsh the consequences of unpaid debt could be, with the moneylender demanding a pound of flesh if the debt was not repaid.

Debt may stem from personal laziness or indiscriminate wastefulness. However, there are also cases where debt increases inevitably despite living diligently and earnestly. The current COVID-19 pandemic era is such a time. Whether due to societal factors or personal circumstances, anyone can reach a state of bankruptcy where they cannot repay their debts.

How should people who cannot repay their debts be handled? Is it reasonable to require them to repay debts for their entire lives? For example, consider a person in their early 30s earning a monthly salary of 3 million won, supporting a spouse and two children, who becomes liable for over 4 billion won in debt (guarantee liability) after co-signing a loan for their father’s business. Even if they use their entire salary to repay the debt, they will never be able to clear it in their lifetime. According to the legal principle that promises (contracts) must be kept, this person should repay the debt for life. Is it just to require someone to live repaying debt forever? Or is it preferable to forgive the debt and allow them to start a new life? If this person is forced to repay debt for life, they may lose the motivation to work and quit their job. This could seriously affect their ability to support their family and the future of their children. It becomes a life without hope. Is such a situation desirable?

In light of these fundamental concerns for individuals, the discharge system was introduced. Discharge eliminates debt to give people who have lived honestly and diligently a chance for a new life. It allows them to live a hopeful new life by freeing them from debt and enabling a fresh start. For businesses, if excessive debt consumes all income, there is no reason to continue operations, and they may have to close. When a business shuts down, employees lose their jobs, and social problems such as family breakdowns can arise. To prevent this, it is necessary to proactively restructure excessive debt for businesses as well.

There are two ways to restructure debt: by agreement with creditors or by compulsory measures. Since reaching an agreement with creditors is difficult, debt restructuring must be enforced, requiring legal support. This is the "Debtor Rehabilitation and Bankruptcy Act" (Debtor Rehabilitation Act). Individuals or businesses burdened by excessive debt can compulsorily adjust their debts under this law. Freed from debt, individuals and businesses can make a fresh start or continue their operations. This leads to family stability and other positive social effects. Debt relief through the Debtor Rehabilitation Act serves as a social safety net. This is the ultimate reason for the existence of the Debtor Rehabilitation Act.

Jeon Dae-gyu, Chief Judge, Seoul Rehabilitation Court

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