[Exclusive] Suwon and Busan Rehabilitation Courts Also Reduce 'Investment Losses' on Stocks and Cryptocurrency

As the number of young people suffering after recklessly jumping into stock and cryptocurrency investments rapidly increases, it has been confirmed that, following the Seoul Rehabilitation Court, the Suwon and Busan Rehabilitation Courts have also established and are implementing regulations that do not consider investment losses as repayment amounts in personal rehabilitation procedures. There are currently three rehabilitation courts nationwide: Seoul, Suwon, and Busan. After Seoul, the other two courts have also prepared support measures for debtors.

According to a comprehensive report by Asia Economy on the 25th, the Suwon Rehabilitation Court established the "Practical Guidelines on the Handling of Stock or Cryptocurrency Investment Losses" on December 20 last year and has been enforcing it since January 1 this year. It was also confirmed that the Busan Rehabilitation Court established similar regulations on July 5 last year and immediately implemented them.

Earlier, the Seoul Rehabilitation Court formed a "Personal Rehabilitation Practice Improvement TF" in 2022 to inspect whether there were cases where debtors were excessively restricted or disadvantaged in relation to stock or cryptocurrency investments. As a result, it identified problems with the practice of reflecting losses from stock or cryptocurrency investments directly in the liquidation value during personal rehabilitation procedures and prepared improvement measures accordingly.

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At that time, the TF confirmed cases where stock and cryptocurrency investment losses, which are not the current economic benefits held by the debtor, were used as a reason for 'moral hazard' to impose restrictions on debtors, based on the logic that the total amount the debtor must repay in the personal rehabilitation procedure should always be greater than the investment loss amount.

Accordingly, on July 1, 2022, the Seoul Rehabilitation Court established and immediately implemented practical guidelines stipulating that when debtors who have suffered losses from stock and cryptocurrency investments apply for personal rehabilitation, the amount or scale of those losses will not be considered in principle when determining the total repayment amount. The guidelines also include an exception to consider hidden assets if the debtor is found to have concealed property by pretending investment failure.

In particular, the Seoul Rehabilitation Court stipulated that, considering the urgent circumstances of debtors experiencing economic difficulties, the guidelines should also apply to ongoing cases at the time of the guideline’s enforcement (excluding repayment plans approved before the guideline enforcement date).

Similarly, the Suwon and Busan Rehabilitation Courts have decided not to consider the amount or scale of stock and cryptocurrency investment losses in principle when determining the total repayment amount for debtors applying for personal rehabilitation after suffering such losses. However, exceptions apply if the debtor is found to have concealed assets by pretending investment failure.

As with Seoul, the other rehabilitation courts’ decision not to consider stock and cryptocurrency investment losses as repayment amounts is expected to accelerate the economic recovery of debtors nationwide who suffer economic hardship due to investment losses.

The reason the other rehabilitation courts established such guidelines appears to be the significant increase in personal rehabilitation applications, mainly from young people in their 20s and 30s who experienced investment failures amid the stock and cryptocurrency boom following COVID-19. Moreover, when the Seoul Rehabilitation Court introduced the system, the exclusion of Suwon and Busan Rehabilitation Courts sparked debates about fairness between Seoul and other regions, which is also analyzed as a background factor.

Kang Ji-hoon, a lawyer who served as a rehabilitation commissioner at the Suwon District Court (4th Bar Exam), said, "Because the standards differed between the Seoul Rehabilitation Court and other courts, there were cases where debtors changed jobs or moved residences, and I understand that some even engaged in false address registration to apply for cases at the Seoul Rehabilitation Court, given that jurisdiction is determined by residence or workplace."

Lawyer Kang said, "Following Seoul, with Suwon and Busan also not considering investment losses as repayment amounts in personal rehabilitation procedures in principle, the existing personal rehabilitation practice that demanded excessive repayments is expected to improve nationwide. It is anticipated that the time for many debtors in their 20s and 30s suffering economic hardship due to investment failures to return to economic activities will be significantly shortened."

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