[Edaily Reporters Namgung Mingwan, Lee Ji-eun, Baek Ju-ah] University student A, in his mid-20s, recently experienced so-called “FOMO” (fear of missing out) amid the current stock and cryptocurrency investment craze, feeling as though he was the only one left behind. After joining a stock trading group on Telegram, he took out loans from secondary financial institutions and even used his credit card limit, but ended up with 50 million won in debt. In an attempt to settle his debt, he searched for online loan advertisements and handed over his bank account information to a lender, only to become involved in a voice phishing scam. As a result, he is now under investigation for financial crimes and has also filed for personal bankruptcy.

Mr. B, a 30-something office worker preparing for marriage, secured a new home by paying a 250 million won jeonse deposit for a newly built villa on the outskirts of Seoul. Believing the contract was secure because he had taken out a jeonse loan and enrolled in the HUG Jeonse Deposit Return Guarantee, the situation took a sudden turn when, as the contract neared its expiration, the landlord was revealed to be a property investor linked to the so-called “Villa King” scandal. While the jeonse deposit remained frozen, the burden of repaying a 200 million won loan remained. The couple, who even considered divorce, ultimately chose personal rehabilitation and are now aiming for a fresh start.

On the 14th, legal circles pointed out that with the recent increase in rehabilitation applications from citizens facing various debt situations, we must not miss this “golden opportunity” to resolve long-standing issues such as disparities in expertise among courts nationwide.

Kim Sang-kyu, managing partner at Law Firm RoBax and a former president of the Suwon Rehabilitation Court, explained, “The biggest change I’ve observed on the ground is the composition of personal rehabilitation applicants. While in the past, the majority were middle-aged and older adults facing business failures or unemployment, recently the proportion of young people and wage earners has increased significantly. A combination of factors—such as the burden of housing costs, investment losses, and rising credit card debt—is leading even people engaged in normal economic activities to choose personal rehabilitation.”

Park Si-hyung, managing partner at Law Firm Sunkyung and vice president of the Korean Bar Association’s Bankruptcy Lawyers Association, noted, “In the past, people were reluctant to file for rehabilitation or bankruptcy due to fear of social stigma, but nowadays, there is a growing trend toward actively filing for rehabilitation.”

Personal Rehabilitation Applications Expected to Exceed 160,000 This Year… Doubling in Five Years

The number of personal rehabilitation applications filed with courts nationwide increased from 81,030 in 2021 to 149,146 last year. This year, the figure is expected to exceed 160,000, a record high. Of particular concern is the growing number of people in their 20s and 30s seeking personal rehabilitation in recent years.

According to the “2025 Personal Rehabilitation Case Statistics Survey Report” based on data from the Seoul Rehabilitation Court, the number of people in their 20s and 30s who filed for personal rehabilitation and received a decision to commence proceedings rose by 32.7%, from 6,913 in 2022 to 9,171 in 2023. The figure has remained around 9,000 through last year (8,974).

Legal experts predict that demand for personal rehabilitation will rise further as financial institutions tighten lending standards, making it increasingly difficult to secure funds.

Park Ki-tae, an attorney at Hanjung Law Firm, explained, “When debtors face financial difficulties, they take out loans with higher interest rates to refinance their existing debts and hold on,” adding, “The moment they can no longer borrow money, they file for personal rehabilitation.” He added, “The data most closely linked to the increase in personal rehabilitation applications is interest rates,” noting, “In addition to recent tightening of lending regulations—such as restrictions on household loans and jeonse (lump-sum deposit) loans—the implementation of the Interest Rate Limitation Act has created a situation where there is nowhere to borrow money, even at higher interest rates.”

The problem is that while demand for personal rehabilitation is growing rapidly, improvements to the relevant system are lagging. With a host of issues requiring attention—including disparities among courts nationwide and an abnormal market where illegal brokers operate covertly—calls are growing within the legal community for both the courts and the government to take action.

Incheon takes 3 months, Uijeongbu takes 10 months… Processing times vary widely by court

According to a study titled “Current Status of Regional Disparities in Personal Rehabilitation Procedures and Solutions,” recently published by the National Court Administration after commissioning the Bankruptcy Law Research Association, the time required from the filing of a personal rehabilitation petition to the issuance of a commencement order varied by nearly threefold across courts nationwide as of 2024.

While Ulsan (101 days), Incheon (105 days), and Chuncheon (108 days) took around three months, Gwangju (143 days), Seoul (151 days), and Suwon (154 days) took around five months, while Daegu (282 days), Gangneung (283 days), and Uijeongbu (287 days) took nearly 10 months.

The repayment rate—the portion of total debt that must be repaid through personal rehabilitation—also varies widely. While the minimum repayment rate recognized by law is 3–5%, a significant number of courts required rates of 10% or higher. Some courts even imposed repayment rates as high as 80% as a form of punishment for gambling or other speculative activities.

The Insolvency Law Research Association pointed out, “It is difficult to find a legal basis for demanding higher repayment rates as a punishment for gambling or speculative activities,” adding, “Consistent standards are necessary from the perspective of fair enforcement of the law.”

Attorney Cho Dong-hyun of Barun Law Firm (Chairman of the Bankruptcy Lawyers Association of the Korean Bar Association) emphasized, “It is a structural contradiction that people must endure debt collection for several more months simply because they live in a rural area,” adding, “Judgments that result in repayment rates fluctuating wildly depending on place of residence—creating a ‘lottery’ effect—must be improved, as they undermine public trust in the judiciary.”

The Insolvency Law Research Association cited the following as causes of this phenomenon: △differences in expertise among judges, △differences in the capabilities and standards of rehabilitation commissioners, and △the absence of unified practical guidelines.

Cho Eun-gyeol, an attorney at Law Firm YK, advised, “The current system, in which rehabilitation commissioners take the lead in handling and correcting nearly all cases before reporting to judges, cannot solve the problem.” He continued, “If it is difficult to significantly increase the number of judges specializing in rehabilitation due to budgetary constraints, it is necessary to establish unified practice guidelines at least for the most problematic areas—such as repayment rates and grounds for dismissal—and to strengthen judicial oversight over rehabilitation commissioners.”

Lawyers Provide Joint Guarantees and Refer Clients to Lenders… Leading to Yet Another Mountain of Debt

The challenges surrounding personal rehabilitation do not end with the courts.

Attorney Park Ki-tae noted, “Illegal practices are occurring where lawyers provide joint guarantees, receive high-interest loans from loan companies, and then omit these from the list of claims,” suggesting, “We could consider a plan where the Credit Recovery Committee or public institutions provide initial support in the form of vouchers and recover the funds as priority claims during the rehabilitation process.”

The Insolvency Law Research Association advised, “We must establish a system where cases are assigned based on the case-handling capabilities of attorneys or judicial scriveners.” To this end, they emphasized the need to review measures such as: △imposing an obligation on application agents (lawyers and judicial scriveners) to interview debtors; △strengthening the responsibility of application agents regarding investigations into debtors’ assets and income; △enforcing effective penalties against those who lend their names; △requiring the use of real names and providing education for assistants; and △disclosing the case handling status of each application agent.