SEOUL, Nov. 30 (Korea Bizwire) – The government will reimburse debts for nearly 1.6 million people to give a second chance to those haven’t been able to escape the debt trap for over a decade.
According to the Financial Services Commission (FSC) on Wednesday, up to 6.2 trillion won will go towards the principal balance of 1.59 million South Koreans after an ability-to-repay assessment, with only those who earn less than 990,000 won per month without any savings qualifying for the measure.
Under the new initiative, some of the most marginalized members of society will be given a second chance to get their financial life back on track, individuals who aren’t currently capable of paying back an average of 4.5 million won in debt per head.
The protective measures for long-term debt defaulters revealed by the FSC and other government branches will take effect from February next year, with the ability-to-repay assessment process to find those in debt for less than 10 million won over the prior 10 years.
As of the end of last year, long-term defaulters with less than 10 million in debt for over a decade were estimated to number 1.59 million, including 830,000 individuals who are in debt to the public Happy Fund, run by the Korea Asset Management Corporation, as well as 760,000 individuals who have borrowed money from private financial services companies and lenders.
Nearly 1.6 million so-called long-term defaulters owe an estimated 6.2 trillion won, with each person owing 4.5 million won on average, and most of them consist of pensioners and individuals over the age of 60, who are among the most vulnerable according to financial regulatory authorities.
Applicants will be asked to prove their financial status by submitting documents and other financial records to the Korea Asset Management Corporation, where one’s ability to repay will be examined.
For instance, single households that earn less than 990,000 won per month whose median income is below 60 percent and own no assets apart from disabled or commercial vehicles will be eligible for the new scheme.
To fund the program and pay off 2.6 trillion won of debt owed to private financial services companies, a special non-profit organization will be established to accept donations and contributions from civil societies and other social groups, while the 3.6 trillion in debt to the Happy Fund can be written off as it’s government-owned.
Ashley Song (firstname.lastname@example.org)