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Record Numbers Filing for Bankruptcy

Posted July. 31, 2006 03:04,   


Reportedly, Korea has seen the largest expansion of people listed in bankruptcy in the first half of 2006, which is from January to June. Low income problems and unemployment issues are not getting better while interest rates and prices are increasing. Many households are suffering from financial problems.

According to the Supreme Court and Bank of Korea (BOK), 49,581 people petitioned for bankruptcy for the first half of this year, which adds more than 10,000 people to last year’s amount standing at 38,773, which was the biggest when measured by an annual standard. When the figure is compared to the same period last year, which stands at 13,931, it is up by 255.9 percent or 35,650.

In January, 5,383 subscribed for bankruptcy. However, monthly average of bankruptcy petitioner surpassed 10,000 since April when the number escalated to 10,247. There is an increase in people who are borrowing money from loan sharks and private loans. According to research held by the Financial Supervisory Service (FSS) on 5,113 borrowers of private loans, 36 percent answered that they used the service “because of living expenses including housing expenditures and doctor bills.” The percentage was 20 percent last year.

Other indicators show that the economy will not be rosy for the working class in the second half of the year.

In the second quarter of 2006, from April to June, the GDP grew by a mere 0.8 percent rating, the lowest increase in five quarters.

Escalating interest rate and inflation are also putting pressures on households. The average annual interest rate of loans in household sector was 5.72 percent in June, which is the highest in 23 months.

The government is considering raising the railroad fee by 7.2 percent, and cross-country and express buses fee by 18 percent and 8 percent, respectively, in the second half.

Suk-Min Hong smhong@donga.com