[Public Voices] Even Individuals Granted Discharge Must Not Be Left Behind

FSC to Delete Personal Rehabilitation Information Early
System Improvements Welcomed as a Step Toward Inclusive Finance
Supporting Small Business Owners and CEOs in Returning to Economic Activity
Removing Obstacles Through Flexible Policy

"Leave no one behind." This is the core value of inclusive finance that the current administration is emphasizing.

The Korea Credit Information Services had previously registered information related to individual insolvency (individual rehabilitation or individual bankruptcy) as public information for five years, if a payment plan confirmation decision (individual rehabilitation) or a discharge decision (individual bankruptcy) was granted. This information was shared so that financial institutions could use it in their credit evaluation processes. Due to the registration and sharing of such public information, small business owners not only faced prolonged rejection of new loan applications but also endured pressure to repay existing loans (and, for CEOs running companies, even company-related loans), along with restrictions or suspension of credit card issuance and use, resulting in significant financial difficulties. As a result, with the inauguration of the Citizen Sovereignty Government, the Financial Services Commission took the initiative to improve the public information management system.

On July 18, 2025, the Financial Services Commission decided that if an individual faithfully fulfills their payment plan for one year during the individual rehabilitation process, their individual rehabilitation information will be deleted early. This system improvement has been positively received, as it has enabled debtors undergoing individual rehabilitation to return to economic activity more quickly.

However, in the case of discharge through individual bankruptcy, early deletion was excluded on the grounds that there could be differences in legal and economic terms due to the nature of complete liability discharge. As a result, even after receiving a discharge, individuals are unable to engage in credit transactions in their own name for five years, making it virtually impossible for them to participate in economic activities.

Is there truly a legal or economic difference between discharge through individual rehabilitation and discharge through individual bankruptcy?

First, let us examine the legal aspect. The ultimate purpose of individual insolvency is a fresh start through discharge. In terms of the legal effect of discharge, there is no difference between individual rehabilitation and individual bankruptcy. In fact, early deletion of public information is granted even in the case of individual rehabilitation where discharge has not yet been achieved, which ultimately favors individual rehabilitation over individual bankruptcy. There is no rational reason to differentiate between individual rehabilitation and individual bankruptcy from a legal perspective, and it is also unfair to favor individual rehabilitation where discharge has not even been achieved.

Next, from an economic perspective, it is desirable to allow individuals to return to the credit system and participate in economic activity as soon as possible. Prolonged registration of public information increases the risk of a second bankruptcy. The recent increase in second and third bankruptcies in the individual bankruptcy practice of the rehabilitation courts shows that this is not a mere concern. The deepening economic slowdown requires a consumption-driven rebound, but if individuals are blocked from credit transactions, consumption cannot be stimulated.

The purpose of individual insolvency is to provide an opportunity for a fresh start through discharge. The term "fresh start" is not explicitly stated in the law, but courts and scholars consistently link discharge with a fresh start. The reason individuals file for bankruptcy is to make a fresh start through discharge. A fresh start has become the ultimate goal for individuals, and the prerequisite for this is discharge. According to this logic, once discharge is granted, there should be no obstacle to making a fresh start. However, long-term registration of public information, even after discharge, serves as a barrier to a fresh start.

The government (Financial Services Commission) is granted considerable discretion in implementing policies. The significance of policy lies in its ability to be improved promptly when difficulties are identified in the field. Policy should be enforced equally for all, but equality must be substantive, not merely formal. Depending on the circumstances, policies must be implemented with various situations in mind. Even if it is difficult to uniformly allow early deletion of public information for discharge through individual bankruptcy, there is a need to recognize special exceptions for early deletion at least for those who, like company CEOs, were compelled to guarantee debts and subsequently received a discharge, or for individuals who are engaged in normal economic activity after discharge. This is the starting point for realizing the core value of inclusive finance—that no one should be left behind.

Jeon Daekyu, Adjunct Professor at Ewha Womans University Law School (former Chief Judge, Seoul Bankruptcy Court)

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