Individual Bankruptcy and Discharge
Individual Bankruptcy — Discharge When Repayment Is Not Feasible
When a debtor's income is insufficient to support an individual rehabilitation plan, individual bankruptcy and discharge provide the orderly close — realization of any non-exempt assets, and discharge of dischargeable debts. The procedure is designed to allow a financial reset, not punishment.
Based on · DRBA Part III (Bankruptcy) and provisions on Discharge · Seoul Rehabilitation Court Practice Rules · Personal Bankruptcy Trustee ManualsStage by Stage
Five Stages of Individual Bankruptcy and Discharge
Petition (DRBA Arts. 294, 556)
The debtor ordinarily files a combined petition for bankruptcy and discharge. The petition is accompanied by a financial disclosure, a schedule of creditors, evidence of inability to pay, and any non-exempt property. The court deposit covers the personal bankruptcy trustee's fee.
Adjudication and Simultaneous Termination (DRBA Art. 317)
If the debtor has insufficient assets to defray the costs of administering the estate, the court issues an order adjudicating bankruptcy and simultaneously terminating the procedure. Where the estate has assets, the procedure continues with a personal bankruptcy trustee appointed.
Examination of the Debtor and Trustee Work
Where a trustee is appointed, the trustee identifies and realizes the debtor's non-exempt property and verifies financial disclosures. The debtor attends an examination at the court. The trustee files a report on whether grounds for refusal of discharge exist.
Discharge Hearing (DRBA Art. 564)
The court holds a discharge hearing. Creditors may file objections. The court reviews whether any grounds for refusal of discharge under DRBA Article 564 exist — concealment of assets, fraudulent transfers, intentional aggravation of insolvency, and similar conduct.
Discharge Order (DRBA Art. 565)
If no ground for refusal is established, the court issues a discharge order. The discharge extinguishes the debtor's personal liability for dischargeable debts. Non-dischargeable claims under DRBA Article 566 survive — intentional torts, certain tax claims, support and child support, claims arising from intentional or grossly negligent injury to life or person.
Grounds for Refusal
When Discharge Can Be Refused
DRBA Article 564 sets out the grounds on which the court may refuse discharge. These reflect a policy of providing relief to good-faith debtors while denying it where conduct undermines the procedure.
Concealment of Property
Hiding, transferring, or damaging assets to defeat creditors before or during the procedure.
False Statements in Filings
Material misrepresentations in the schedule of creditors, statement of property, or evidence supplied to the court.
Intentional Aggravation of Insolvency
Incurring debts without realistic prospect of repayment, gambling losses on a meaningful scale, lavish expenditure incompatible with the debtor's income.
Prior Discharge Within Seven Years
A discharge has already been granted within the past seven years; bankruptcy discharge is generally not available again within that period.
Bribery or Obstruction
Bribery offered to other creditors or the trustee, or other obstruction of the orderly administration of the procedure.
Failure to Cooperate
Failure to attend the examination, to produce documents, or to perform the duties imposed on the debtor under the DRBA.
Non-Dischargeable Debts
What the Discharge Does Not Reach (DRBA Art. 566)
Even if the discharge order is granted, the following categories of claims survive — the debtor remains personally liable to that extent.
- Tax claims, fines, criminal penalties, civil-court ordered penalties
- Damages for intentional torts
- Damages for intentional or grossly negligent injury to life or body
- Statutory support and child-support obligations
- Wages and severance owed to the debtor's own employees
- Claims that the debtor failed to disclose despite knowing the creditor
- Debts incurred by intentional fraud (subject to creditor showing)
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