Commercial banks to kick off debt rescheduling plan

South Korean commercial banks will kick off their debt restructuring programs for the so-called “house poor,” who are unable to pay off their debts, including mortgages, starting on Monday.

Under the plan named “pre-workout,” the banks will extend the repayment period for borrowers with fewer than 90 days of delinquency to up to 35 years, industry sources said Sunday.

However, borrowers whose properties are under legal dispute can not apply for the program. Borrowers who filed for a personal finance rehabilitation and bankruptcy also cannot use the program.

“The pre-workout program will help mitigate the burden of the house poor as the extended payment period will reduce their monthly repayments,” a source said.

An official at the Korea Federation of Banks said, “Commercial banks will aggressively introduce the program, as increased borrowers’ ability to repay debts will be helpful for their profitability.”

Last month, the Financial Services Commission, the country’s top financial regulator, expected a total of nearly 22,000 financially troubled households will be able to benefit from the pre-workout in 2013, with the value of rescheduled debts to reach 2 trillion won ($1.8 billion). (Yonhap News)