Gambling and games leave the young in debt
Published: 21 Jul. 2019, 19:01
“I kept telling myself not to get a loan, but without it, I couldn’t live,” an unnamed 20-year-old said in a statement.
“Like an idiot, I was obsessed with games on my smartphone and purchased [game] items,” the person added. “I even went on to do Sports Toto [Korea’s legal sports betting service].”
This was part of a statement submitted to a law firm handling the personal bankruptcy and debt rehabilitation of a 20-year-old whose identity, including gender, was not disclosed. The 20-year-old has filed for a court ordered debt restructuring after racking up 13 million won ($11,069) of debt. According to the statement, the person is repaying 725,000 won on the loan every month on top of 400,000 won of interest. It is a heavy burden considering their monthly income is 1.8 million won.
Another 20-year-old visited a law firm to get some advice on his debt problem.
“I promised myself that once I was in a relationship, I would go on trips, eat delicious food, visit fun places and even buy gifts,” the 20-year-old said in a statement to a law firm. “But as I did, my spending grew.”
The number of people filing for personal bankruptcy or requesting debt restructuring has been falling since the global crisis of 2008.
But the situation changed this year.
According to the National Court Administration on Wednesday, the number of people filing for personal bankruptcy between January and May totaled 19,193, which is up 8.6 percent compared to the same period a year ago.
By age, the debt problem for those in their 20s has been growing at an alarming rate.
According to My Wallet Lab, a civic group, which used data received from the National Court Administration, bankruptcies for those in their 20s grew 29.1 percent over the past five years.
The JoongAng Ilbo examined six statements from people in their 20s and one from a 30-something submitted to law firms specializing in bankruptcy and debt restructuring. It turned out many were in huge debt not because of ambitious business plans but rather on overspending on trivial activities. They even borrowed from loan sharks charging interest between 20 and 30 percent. Some used the money to purchase the latest smartphone. There are also those who gambled on sports in hopes of winning money for late night binge drinking with friends.
“There are many cases among university students who are buried in huge debt, including student loans, and even those borrowed for living expenses,” said Kim Yong-seok, an attorney at Haenae law firm. “They eventually end up filing for debt restructuring after they spent time without finding a job after graduating from school.”
Experts say the uncontrollable urge for consumption is a primary cause of young people filing for bankruptcy. It is not just the economic slowdown.
Some young people in immediate need of cash earn between 200,000 won and 300,000 won for illegally opening mobile phone accounts for those who want phone numbers not in their names.
“Recently, crimes that make cash out of free gifts from funeral service companies are increasing as well,” said Kim Hwa-rang, the head of TheCheat, a website on online fraud.
There is also a case of a person who started a business with friends and had to deal with out-of-hand debt.
A 26-year-old man surnamed Kim quit a company that paid 2.5 million won as a monthly salary and started a fruit lunch box delivery service but had to stop the service after six months. He had to repay 40 million won of debt and even took a loan from an unregistered institution and could not handle the high interest rate.
As a result, he filed for personal rehabilitation on the condition that all his income except for the minimum cost required for living would go toward repaying the debt for three years.
“Although I am free from the burden since money lenders do not call me anymore asking me to repay the debt, I divorced my wife and let a four-year-old child go,” said Kim with a bitter smile.
On internet sites related to law, a number of people who filed for bankruptcy and rehabilitation posted their stories online.
A worker who is in his 30s wrote that in his late 20s, he was so immersed in mobile gambling all day that the debt reached 33 million won. He added that he filed for personal rehabilitation on the condition that he would repay 940,000 won every month for three years.
“I regret the precious early days wasting my time working as a chauffeur late at night even after leaving the office to repay my debt.”
“The quality of loans is getting worse,” said Jeon Ji-ye, the director of Financial Justice.
“When those in their 20s first get a loan of 2 to 3 million won, they think their monthly income from part-time jobs is enough to repay the debt,” said Choi Ok-hwan, a notary dealing with bankruptcy. “However, as they do not consume less, they eventually juggle multiple credit card balances and start to take loans with higher interest rates.”
Some analysts believe that the fundamental cause of the increase in bankruptcy of those in their 20s is the recession rather than mindless consumption.
“There are those in their 20s who are not able to repay their debt and come to consult after their family business fails or they get into an accident doing a part-time job,” said Lee Sun-in, Director of Seoul Central Credit Counseling & Financial Service.
“If the young lives in capital area, cost of living, including monthly rent, communication and food expenses, is relatively higher, so they start to juggle multiple credit card balances with balances of hundreds of thousands of won, and the debt increases to tens of millions of won soon.”
Some also complain that due to the rapid rise of the minimum wage for straight two years from 2018 to 2019, jobs available for people in their 20s have decreased.
BY JEONG JIN-HO [[email protected]]
with the Korea JoongAng Daily
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