When a debtor who owes you money files for individual rehabilitation

Quite a few people who lent money to a business partner or acquaintance come to us for a consultation. They have received a commencement decision and a list of creditors from the court and don't know what to do. Creditors have more tools than you might think, but every one of them comes with a deadline.

If the amount is wrong, act within the objection period

A creditor who objects to the content of the list of individual rehabilitation creditors may apply in writing within the objection period for a trial to examine and determine individual rehabilitation claims (개인회생채권조사확정재판) (Article 604(1) of the Debtor Rehabilitation and Bankruptcy Act). The objection period is set at between 2 weeks and 2 months from the date of the commencement decision (Article 596(2)1). If you don't apply within this period, the claim is determined as stated in the list, and once entered in the creditor schedule, it has the same effect as a final judgment (Article 603).

If you were already suing the debtor, you don't apply separately; instead, that lawsuit is changed into a suit to examine and determine the claim (Article 604(2)). It is also easy to overlook that the application will be dismissed if you don't pay the costs in advance when applying (paragraph 4 of the same article).

Objections to the repayment plan are made at the meeting

At the creditors' meeting, creditors may state objections to the repayment plan (Article 613). If there is an objection, the court may approve the plan only if the amount repaid to the objecting creditor is at least what they would receive as a distribution in bankruptcy, the debtor puts all of their disposable income toward repayment, and the amount is at least the statutory minimum repayment (Article 614(2)). For an objection to carry weight, you need materials showing hidden income or assets, such as a shop the debtor runs, property moved into a spouse's name, or a vehicle disposed of just before the application.

If assets were siphoned off, an order to exercise avoidance rights

If the debtor transferred property knowing it would harm creditors, or repaid only certain creditors, you can apply to the court for an order requiring the debtor to exercise avoidance rights (부인권) (Article 584(3)). This cannot be exercised once 1 year has passed from the date of the commencement decision, so act quickly once you learn of the circumstances (paragraph 5 of the same article). If the other party has filed for bankruptcy, the bankruptcy trustee investigates the property, so hand your materials to the trustee; if you oppose a discharge, file an objection by showing grounds for refusing discharge within 30 days of the discharge examination date (Article 562).

No direct demands for payment; guarantors are separate

Once the commencement decision is made, compulsory execution or demands for repayment based on claims on the list are prohibited (Article 600(1)). Rather than contacting the debtor out of frustration to demand money, the right approach is to respond through the rehabilitation commissioner, and if after approval repayments do not come in and it is clear the plan cannot be carried out, you can apply for the proceedings to be discontinued (Article 621(1)). If there is a guarantor, you can claim against the guarantor regardless of the debtor's rehabilitation (Article 625(3)).

For corporate creditors, the day you receive a business partner's commencement decision is the day internal deadline management begins. The first task is to put the last day of the objection period and the meeting date stated in the decision on your calendar.