Bankruptcies soar by over 10% as pandemic takes toll

Personal and corporate bankruptcies in South Korea increased by more than 10 percent last year, data showed Monday, reflecting the economic impact of COVID-19 on both businesses and households.

According to the report released by the National Court Administration, the number of personal bankruptcies filed in 2020 rose by 10.4 percent from the previous year, from 45,654 cases to 50,379 cases. Last year’s tally was the biggest figure since 2015.

After hitting a record high of 150,439 cases in 2007, bankruptcy filings were on a downward trend for more than 10 years until 2018. They rebounded in 2019 and increased again last year.

The report also noted that the number of corporate bankruptcies filed last year increased to 1,069 cases, rising 14.8 percent, or 138 cases, from the previous year. It is the first time the figure has exceeded 1,000 since record-keeping began in 2004. 

Last year’s steep increases in personal and corporate bankruptcies may have been caused by COVID-19 and the associated economic contraction. During the same period, requests for bankruptcy discharges rose 10.28 percent, or 4,614 cases, to 49,467 cases. Courts granted discharges in 38,390 of those cases.

A bankruptcy discharge releases a debtor from personal liability for certain specified types of debts in the event of an unavoidable hardship such as a natural disaster or economic fluctuation.

The report said the number of applications for individual rehabilitation procedures, in which some debt forgiveness is offered to those who faithfully fulfill their obligations, decreased 6.5 percent from the previous year, or 6,034 cases, to 86,553 cases last year.

The number of applications for real estate auctions decreased 9.8 percent, or 8,005 cases, to 73,403 cases due to higher property prices. When the real estate market is booming, there are usually fewer auctions because sales are mostly concluded in the market.

By Park Ga-young (gypark@heraldcorp.com)