Individual Bankruptcy Petitions Doubled for One Year

Due to the recessing economy and cumulating debts, the number of bankruptcy petitions filed by domestic corporations and individuals has increased by 82.6% last year compared with that of 2000.

According to the Judicial Almanac of 2002 published by the Supreme Court, 170 petitions under Chapter 11 were filed last year, up by 28.8%.

On the other hand, the number of composition petitions was decreased from 78 cases in 2000 to 51 in 2001. Once a corporation files the composition petition, under the arbitration of the court, the corporation submits a payment schedule and, thus, avoids bankruptcy with the management still retained.

The petitions for reorganization had been remarkably reduced to 31 from 148 in 1998. The reorganization allows stay on payments in order to resuscitate the corporation at issue.

On September 2, 2002, one court official confirmed, “Up to 1998, composition cases well exceeded bankruptcy cases with the launch of the resuscitation drive for corporations since the economic crisis. However, from 1999, shot up was the number of companies that had been definitively determined insolvent by the court.” Individual bankruptcy cases marked a record high last year (672 cases), more than doubled from 2000.

Experts analyzed that the increase of bankruptcy petitions reflect on the recent difficulties of our economy, which have been caused by the loose financial management by corporations and individuals.

One official of Seoul District Court opined, “100% of last year’s Chapter 11 petitions by corporations were accepted by the court as sound, and are now pending with the court. Both of companies and individuals suffered from burgeoned debts from loose financial management. This increasing trend will continue unless the economy turns good.” He continued, “One of the reasons for increased Chapter 7 petitions is the unrestrained individual consumption partly caused by the low interest rate.” Out of the total petitions filed, the court entered the discharge order in 265 cases. For the first six months of this year, the court ruled exemption for debtors in 204 cases out the total of 438 cases filed.

Wi-Yong Jung Jung-Eun Lee viyonz@donga.com lightee@donga.com