After personal debt ‘workout,’ most people bounce back

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After personal debt ‘workout,’ most people bounce back

Until last autumn, Huh Sang-gu could not rid himself of an overwhelming debt. Loans for his shoe store and the default of a loan guarantee for a friend created debts of 700 million won ($580,000).

In order to evade debt collectors, he had to change his residence every two months.

Pushed to the edge, he finally sought help from the Korea Legal Aid Corporation.

With its support, he received approval from the Seoul Central District Court to undergo a debt workout program last November.

The debt workout, if approved by the court, means that an individual is allowed to keep part of a salary to pay for minimum living costs, while using the rest of the income to pay down debts over a period that can last as long as five years.

Those who have incurred too much debt to pay it back must declare bankruptcy.

Huh, who now works as a taxi driver, spends 500,000 won a month on servicing his debt.

The debt collection service was initially cautious about Huh, believing he might disappear after he was approved for a debt workout. Now, they acknowledge he can be trusted.

“I thought it was going to be the end,” Huh said. “It was difficult to believe that you can free yourself from debt if you simply work hard.”

After the Legal Aid Corporation established the Individual Debt Workout and Bankruptcy Support Center last January, it surveyed 353 people who used the service and found that 79 percent reported that they had resumed normal lives.

Among those surveyed, all 151 persons who received debt workouts and two-thirds of the 212 persons who declared bankruptcy report they are currently employed.

Although there were concerns that many would return to their spendthrift ways after the workout program or declaration of bankruptcy, the numbers show that most have chosen to rehabilitate their lives and become independent by working diligently.

In the case of Won Mo, who ran a printing company, the court declared him bankrupt after his company failed and he couldn’t pay back his two billion won bank loan. Since then, Won has been working at a printing company in central Seoul.

“Applicants have to declare bankruptcy when they are deemed incapable of paying back their debt,” said Choi Jung-gyu, a lawyer at the center.

“The fact that 65 percent of those declared bankrupt have found new jobs is an encouraging result. This survey affirms that our society is still somewhat healthy.”

So far, more than 10,000 people, including 4,400 from Seoul, have sought aid from the center, with 9,597 receiving some form of legal aid.

The number of workout or bankruptcy applicants rose due to the economic crisis, but began to fall in the second half of last year.

The average number of applicants between March and May this year was 30 percent less than the same period a year earlier.

“It’s too early to draw hasty conclusions, but with the revival of the economy, the economic situation of individuals seems to be gradually getting better,” Choi said.

By Lee Hyun-taek []
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