High-interest loans trigger individual bankruptcies

As more people turn to high-interest loans using their credit cards, the number of those filing for individual bankruptcy is also increasing. Individual bankruptcy refers to a procedure under which an individual unable to repay debts seeks court permission to be temporarily relieved of debt obligations. Until his reinstatement, the person faces various legal constraints, including a ban on becoming a legal trustee of for someone else`s properties.

The Seoul District Court said Monday that only three individual bankruptcies were reported last December but that the figure increased to 13 last month and 12 as of Monday. The figures mark a considerable increase from nine in January last year and three in February. As many as six people filed for court protection just last week as banks pressed them to repay credit card loans ahead of their shareholders` meetings and account settlement deadlines.

Cases of individual bankruptcy came to just 14 in 1997, but after the financial crisis erupted late that year, the number surged to about 250 in 1998 and 300 in 1999. Last year the figure dropped to 87. ``The number of individual bankruptcies has rapidly increased since banks changed their business focus to households because it is relatively easy to secure securities for loans from households and they are less likely to default on loans. Moreover, an increasing number of households are depending on card loans,`` said a court official.