Debtor Rehabilitation and Bankruptcy 'Protected Assets' Shift from Fixed Amount to Fixed Rate... Reflecting Inflation and Other Factors

Ministry of Justice Announces Legislative Notice for Debtor Rehabilitation Act Enforcement Decree... "Minimum Livelihood Guarantee"

The upper limit of protected assets for the debtor’s minimum livelihood maintenance in personal rehabilitation and bankruptcy will change from a fixed amount to a fixed rate.

On the 26th, the Ministry of Justice announced that it will give prior legislative notice of the “Enforcement Decree of the Debtor Rehabilitation and Bankruptcy Act” (Enforcement Decree of the Debtor Rehabilitation Act) containing this content.

The Ministry of Justice explained that the amendment aims to guarantee the minimum livelihood in line with the price level by revising the upper limit amount of assets excluded from sale during personal rehabilitation and bankruptcy from a fixed amount to a fixed rate to ensure the debtor’s living stability.

The current Enforcement Decree of the Debtor Rehabilitation Act was amended in 2019 to set the upper limit of protected assets in rehabilitation and bankruptcy at 11.1 million KRW. This was based on 40% of the median income for a four-person household in 2019, calculated as six months’ living expenses. The median income standard refers to the median value of national household income announced by the Minister of Health and Welfare after deliberation and resolution by the Central Living Security Committee, used as a standard for benefits.

However, there have been ongoing criticisms that setting the upper limit of assets excluded as living expenses from the assets used for debt repayment as a fixed amount has limitations in immediately reflecting economic conditions such as price fluctuations.

Accordingly, through the amendment, the Ministry of Justice set the upper limit amount as the amount obtained by multiplying 40% of the median income for a four-person household according to the “National Basic Living Security Act” by 6 (based on the time of rehabilitation or bankruptcy declaration) to reflect the price level at the time of rehabilitation or bankruptcy.

Therefore, when a debtor applies for personal rehabilitation or bankruptcy, the six months’ living expenses necessary for the debtor’s livelihood can be excluded from the assets used for repayment within a certain amount based on the court’s judgment.

A Ministry of Justice official said, “With this amendment, the amount of assets protected in personal rehabilitation and bankruptcy will be reasonably calculated, which is expected to help maintain the minimum livelihood and economic recovery of debtors using the personal rehabilitation and bankruptcy procedures.”

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