MOU between National Court Administration and Financial Services Commission for expedited credit management at lower cost

Improving public accessibility and convenience to individual rehabilitation and bankruptcy procedures

1. MOU signing ceremony

¡Ü  On December 16, 2016, Minister KO Young-han of the National Court Administration and Chairman YIM Jong-yong of the Financial Services Commission concluded Memorandum of Understanding for Stronger Inter-organizational Collaboration for Court-Administered and Out-of-Court Credit Management Procedures.

* Court-administered credit management: individual rehabilitation and bankruptcy procedures administered by courts

* Out-of-court credit management: individual workout and pre-workout services provided by Credit Counseling and Recovery Service, etc.

¡Ü  During the meeting, the Minister and Chairman shared the performance status of the ‘Fast-Track Credit Management Procedures’ and discussed the methods and directions to improve the credit management system.

    <Expected results of Fast-Track Credit Management Procedures>

   ① Shorten the court-administered credit management period: The previous procedure took as long as 9 months whereas the fast-track procedure can be processed within 3 months

   ② Save the cost spent on legal services (average 2 million KRW)

   ③ Lessen the burden of paperwork by utilizing credit counsel reports from credit management institutions

2. Contents of the MOU

I. The two organizations shall provide the information and support for nationwide expansion of the Fast-Track Credit Management Procedures.

* The Fast-Track Procedure is currently provided only within the respective jurisdictions of five district courts of Seoul, Busan, Gwangju, Uijeongbu and Daejeon that concluded MOUs with the Credit Counseling and Recovery Service.

II. The two organizations shall support the mutual cooperation and procedural collaboration between all district courts of the nation and private credit management organizations, i.e. Credit Counseling & Recovery Service, National Happiness Fund, etc.

III. The two organizations shall provide consultation channels to strengthen the collaboration in processing the court-administered and out-of-court credit management schemes and to discuss measures to improve related laws, systems and procedures

3.  Summary of speeches by Minister Ko and Chairman Yim

¡Ü  Minister KO Young-han of National Court Administration

“The MOU concluded today with the Financial Services Commission will enhance transparency of the application process by fundamentally eliminating the accessibility of malignant brokers throughout the individual rehabilitation and bankruptcy application process, strengthen the accessibility of debtors to the individual insolvency procedures by providing the necessary legal services at lower cost, and enable expeditious and efficient processing of the procedures through the effective use of preliminary reports of the Credit Counseling and Recovery Service during the hearings and minimization of redundant examinations.

The National Court Administration expects that the collaborative relationship with the Financial Services Commission will successfully continue in the future as the two organizations endeavor to build advanced restructuring schemes through systematic management and monitoring of individual and corporate insolvency cases.”

¡Ü  Chairman YIM Jong-yong of Financial Services Commission

“Conclusion of the MOU between our two organizations will serve as a turning point to expeditiously expand the Fast-Track Procedures across the nation, which will enhance the public accessibility to and convenience of court-administered credit management procedures.

This agreement also has high significance to both of our organizations that it provides the venue in which the two organizations can have fruitful discussions on the measures and directions to improve the court-administered and out-of-court credit management procedures.

The Financial Services Commission plans to provide more extensive financial support and credit education through the Credit Counseling & Recovery Service for applicants to court-administered credit management procedures, such as by increasing the credit line of emergency loans from the current 5 million KRW to 7 million KRW for dutiful performers of debt repayment obligations.”^*

^* Debtors who were recognized as eligible persons for individual rehabilitation case and completed the entire repayment amount or successfully fulfilled repayment obligation for 24 months or longer duration are subject to low-interest loans (4% or less) offered at thirty-three Financial Inclusion Service Centers for the purposes to support living, repay debt, run business or cover educational expenses.