"Neither Public Officials nor Security Guards Allowed"… Hundreds of Personal Bankruptcy Discrimination Rules Hampering Economic Vitality

Over 200 Employment Ban and Related Restriction Laws
"Bankruptcy Suitable"… Choosing Personal Rehabilitation Amid Various Regulations

#. A woman in her 30s, Ms. A, who is raising her daughter alone, lives on a monthly post-tax income of 1.7 million KRW and 500,000 KRW in child support sent by her ex-husband. Recently, with her loans increasing, Ms. A planned to quickly settle her debts and return to daily life through the 'personal rehabilitation' process. However, a financial counselor advised her to file for 'personal bankruptcy,' saying her loans were at an unmanageable level. Ms. A was troubled upon hearing that it would be difficult to find a job with the four major social insurances.

Currently, there are more than 200 laws that restrict the qualifications or status of bankrupt individuals. Bankrupt persons are disqualified from becoming public officials and cannot obtain professional qualifications such as lawyers, judicial scriveners, or tax accountants. They are even disqualified from jobs such as security guards, child caregivers, marriage brokers, and insurance planners. They are also deprived of eligibility to serve as jurors in citizen participation trials and to take national scholarship exams. This differs from the personal rehabilitation procedure, which prohibits discriminatory treatment.

According to the Court Statistics Monthly Report on the 21st, the number of personal rehabilitation applications filed nationwide in the first half of this year was 41,787, a 3.9% increase from 40,205 last year. However, personal bankruptcy applications decreased from 50,379 to 49,063 during the same period, showing a contrasting trend.

Baek Ju-seon, president of the Korea Bankruptcy and Rehabilitation Lawyers Association, said, "Personal bankruptcy can quickly settle heavier debts than personal rehabilitation, but the restrictions on qualifications and status are very extensive." He added, "Bankruptcy and rehabilitation are complementary; if one side is too suppressed, it is difficult for the personal insolvency system as a whole to be activated. From the creditor's perspective, it is preferable in the long term to face the debtor again as a new customer rather than being stuck on past claims."

He also explained, "We need to consider the social costs and economic losses incurred when debts are neglected. The United States, where the bankruptcy system is well-activated, was able to recover the economy most quickly during every economic crisis, such as the 2008 subprime mortgage crisis."

A judge at the Seoul Rehabilitation Court emphasized, "Many discriminatory regulations against bankrupt individuals were excessively legislated in the past. If the requirements are met, one should be able to file for bankruptcy, but considering various disadvantages, people go through the rehabilitation process." He added, "Recently, in practice, we encourage applicants for rehabilitation who seem more suitable for bankruptcy to withdraw their application and change the procedure, but we cannot force them. Legal amendments are needed to reduce the stigma and discrimination against bankrupt individuals."

Last year, Representative Park Ju-min of the Democratic Party of Korea, in cooperation with the Seoul Rehabilitation Court and People's Solidarity for Participatory Democracy, introduced a bill for revision. However, it has not passed the standing committee and is currently pending. A representative from Park's office stated, "(Since there are hundreds of related legal provisions) too many standing committees are involved," adding, "We plan to hold meetings with related institutions and organizations soon to continue discussions reflecting recent situations."

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