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Policy Study Evaluation and Policy Implications of Personal Loan Modification Programs in Korea December 31, 2014

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Series No. 2014-09

Policy Study KOR Evaluation and Policy Implications of Personal Loan Modification Programs in Korea #Consumer Finance #Risk Management #Consumer Welfare and Protection
DOIhttps://doi.org/10.22740/kdi.ps.2014.09 P-ISBN978-89-8063-914-4

December 31, 2014

  • 프로필
    OH, Yoonhae
Summary
This study attempts to derive policy implications in response to the acute increase in applicants for the reconstructive personal bankruptcy (Chapter 13 style). Thus, this study analyzes the determinants of debtors’ choice among various debt relief programs. This study also compares the characteristics of two programs, the reconstructive personal bankruptcy by the Court and the private debt modification program by the CCRS (Credit Counseling and Recovery Service). Main findings and implications of this study can be summarized as follows.

Firstly, analyzing the regionally aggregated data, we found out that the increase in the amount of household debt and the portion of high interest loans induced the recent increase in the number of applicants for the reconstructive personal bankruptcy. Moreover, we investigated the sample of debtors in Seoul who used the reconstructive personal bankruptcy and the private debt modification by the CCRS. We found out that the debt structure of an average debtor became more vulnerable in the period between 2012 and 2013, with the increases in the amount of total debt, in the portion of high interest loans, and in the number of creditors. Accordingly, we emphasize the necessity to enlarge the preemptive credit counseling for the over-indebted so that they could switch their consumption habits and debt structure.

Secondly, with the analysis of regionally aggregated data, we also found out that past rulings and attitude of the Court affect the choice of debtors. The nationwide declination in the number of applicants for liquidating personal bankruptcy (Chapter 7 style) can be explained by the strict procedure of the Court in Chapter 7 since 2007. And the regional variety in the ratio of applicants between Chapter 13 and the debt management by CCRS can be explained by the Courts’ acceptance rate of Chapter 13. Thus, abusive use of the reconstructive personal bankruptcy could be restrained if the Court reinforces its screening process.

Lastly, this study shows that the average reimbursement rates are similar between the reconstructive personal bankruptcy and the personal debt management by CCRS, and thus low-cost private debt management program could be more beneficial to debtors in some cases. Therefore, debtors should bear in mind that their legal agents might try to induce them to the Court for legal fee incentive. On the other hand, this study also demonstrates that the probability of failure with debt management by CCRS becomes larger for debtors in the category of a high debt-to-income ratio, the self-employed and older people. Thus, when the CCRS considers the probability of failure is high for some applicants, the CCRS should refer them to the Court and this will help increase the efficiency of debt modification procedure.

In addition, this study also introduces an existing discussion about the improvement plan of the debtor recovery system and suggests some proposals.
Contents
발간사
요 약

제1장 서 론

제2장 선행연구 소개 및 채무자 구제제도 개괄
 제1절 채무자 구제제도의 개괄
 제2절 관련 선행연구 소개

제3장 채무자 구제제도 선택의 결정요인 분석
 제1절 연구가설과 자료의 성격
 제2절 회귀분석 결과
 제3절 소 결

제4장 개인회생과 개인워크아웃의 비교 및 채무조정 성공의 결정요인 분석
 제1절 서울지역 개인워크아웃과 개인회생 이용자의 특성 비교
 제2절 채무조정제도 이용자의 변제율과 중도탈락률
 제3절 서울지역 채무조정제도 이용자의 채무조정 성공요인 분석
 제4절 소 결

제5장 기존의 채무조정제도 개선 논의와 평가
 제1절 기존의 제도 개선 논의 소개
 제2절 평가와 개선방안

제6장 결론: 요약 및 정책제언

참고문헌
부 록
ABSTRACT
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