Navigating financial distress is isolating. Between the constant calls from creditors and the anxiety of mounting interest, the legal system can feel like a maze designed to keep you out rather than help you through.
However, the Korean legal system offers a robust mechanism for debt relief known as Individual Rehabilitation (개인회생). This is not merely a legal proceeding; it is a mathematical restructuring of your finances designed to offer a fresh start.
At Lawset, we believe in “Pre-Legal Triage.” Before you hire expensive counsel or file formal petitions, you must understand the math behind the law. Eligibility for rehabilitation isn’t based on a judge’s mood; it is based on hard data regarding your income, debt caps, and asset valuation.
This guide breaks down the specific criteria you must meet to qualify, moving beyond legal jargon to the practical numbers that determine your future.
The Core Principle: Insolvency vs. Ability to Repay
The most confusing aspect of Personal Rehabilitation is the inherent paradox: to qualify, you must be financially “broken” enough to need help, yet stable enough to pay back a portion of what you owe.
Unlike personal rehabilitation which liquidates assets to wipe out debt immediately, Individual Rehabilitation is a 3-to-5-year payment plan. The court grants you protection from creditors in exchange for your commitment to pay all disposable income toward your debt for a set period. After completing this plan, the remaining debt is discharged.
What is Insolvency?
Definition: To qualify for personal rehabilitation in Korea, a debtor must demonstrate that their liabilities exceed their assets. This state is known as insolvency.
If you sold everything you own today (house, car, deposits) and could pay off all your debts with money left over, you are not insolvent, and the court will likely reject your application. You must prove that you are currently unable to repay your debts or that such a state is imminent.
Criterion 1: Continuous and Recurring Income
The second pillar of eligibility is the ability to generate income. The court needs assurance that you can maintain the monthly payments for the duration of the 36 to 60-month plan.
This requirement is strictly mathematical. Your monthly repayment amount is calculated using the following formula:
The Repayment Formula:
(Monthly Income) – (Minimum Cost of Living) = Monthly Repayment Amount
If the result of this formula is zero or negative, you are not eligible for Rehabilitation (though you may be eligible for a 개인회생 or personal rehabilitation
Accepted Income Types
The court looks for “future earning potential.” It does not matter if you are a salaried employee, a freelancer, or a business owner, provided the income is continuous and provable.
Salaried Employees: Full-time staff with regular pay stubs.
Part-Time Workers: Albeit lower income, if it is consistent, it qualifies.
Business Owners: Self-employed individuals or CEOs.
Freelancers/Gig Workers: Delivery drivers, tutors, or contractors (requires careful documentation of average income).
Pensioners: Individuals receiving regular pension payments.
Note: Irregular or inconsistent income makes the process more complex, as the court will average your income over the past year to determine a baseline.
Criterion 2: The Hard Debt Limits
Even if you are insolvent and have income, there is a ceiling to how much debt can be handled through Individual Rehabilitation. If your debt exceeds these statutory limits, you are ineligible for this specific program and must look into “<a href=”[Lawset Internal Link to General Rehabilitation]”>General Rehabilitation</a>,” which is a more complex and costly procedure.
Monetary Caps for Personal Rehabilitation
Key Stat: The debt limits for Personal Rehabilitation eligibility in Korea are 1 Billion KRW for unsecured debt and 2.5 Billion KRW for secured debt.
It is vital to distinguish between the two types of debt:
Unsecured Debt (Limit: 1 Billion KRW): This includes credit card debt, personal loans, medical bills, and utility arrears. These loans are not backed by collateral.
Secured Debt (Limit: 2.5 Billion KRW): This primarily includes mortgages (Jeonse loans or home purchases) and vehicle loans where the creditor has a lien on the asset.
If your unsecured debt is 1.1 Billion KRW, you are technically disqualified from Individual Rehabilitation. Therefore, precise calculation of principal and interest at the time of filing is critical.
Criterion 3: Asset Valuation (Liquidation Value)
Perhaps the most overlooked criterion is the Liquidation Value Guarantee Principle (청산가치 보장의 원칙).
This legal principle states that the total amount you repay over the 3-5 year plan must be greater than the current liquidation value of your assets. In simple terms: Creditors must receive more money from your payment plan than they would if you simply went bankrupt and sold all your assets today.
Assets included in this valuation are:
- Real Estate (minus secured mortgage amounts)
- Vehicles
- Insurance Surrender Value (the cash value if you cancelled policies today)
- Lease Deposits (Jeonse/Wolse deposits)
- Expected Severance Pay
Scenario of How Asset Value Affects Payments
If you have high asset value, your monthly payments will be forced upward to meet this requirement, regardless of your income level.
Scenario Example:
- Total Unsecured Debt: 100 Million KRW
- Total Asset Value: 50 Million KRW
- Proposed Plan Duration: 36 Months
Under the Liquidation Value Guarantee Principle, your total payments over 36 months must exceed 50 Million KRW.
Minimum Monthly Payment:
50,000,000 ÷ 36 ≈ 1,388,888 KRW/month.
Even if your “Disposable Income” calculation suggests you can only afford 500,000 KRW/month, the court will not approve the plan because it violates the liquidation value principle. You would either need to pay more or sell assets to lower the liquidation value.
Quick Qualification Checklist
Use this table for a rapid self-assessment of your eligibility for Individual Rehabilitation.
| Category | Requirement | Red Flag (Potential Disqualification) |
| Insolvency | Total Debt > Total Assets | You have enough liquid assets to pay off all debts immediately. |
| Income | Continuous, recurring income (Wages, Business, Pension) | No income, or income is lower than the Minimum Cost of Living. |
| Debt Amount | Unsecured < 1 Billion KRWSecured < 2.5 Billion KRW | Debt exceeds statutory limits (requires <a href=”[Lawset Internal Link to General Rehabilitation]”>General Rehabilitation</a>). |
| Asset Value | Total repayment amount > Liquidation value of assets | Assets are so high that the required monthly payment is unaffordable. |
| Past History | No rehabilitation discharge in the last 5 years | You received a discharge from a previous rehabilitation case less than 5 years ago. |
Common Disqualifiers & Hurdles
While the math may look correct, the court also examines the nature of your debt and your recent financial behavior.
- Recent Loans and Fraudulent Intent
If you took out significant loans immediately before filing for rehabilitation, the court may view this as fraud. There is no strict “cutoff,” but loans taken within 3-6 months of filing are scrutinized heavily. If deemed fraudulent, the request will be dismissed. - Gambling and Stock Investment Debts
Debts incurred through gambling, excessive stock trading, or cryptocurrency speculation are technically eligible for rehabilitation. However, the courts are stricter here. They may require you to repay a much higher percentage of the principal (sometimes 100%) rather than forgiving a portion of it, to avoid “moral hazard.”
Why You Need a ‘Case Pre-Arrangement’ First
Filing for Personal Rehabilitation is a legal process, but eligibility is fundamentally a data problem that requires precise analysis. Many individuals pay significant retainer fees to law firms, only to find out months later that their asset valuation was too high or their debt exceeded the statutory limit. This results in lost time and money when you can least afford it, highlighting the critical role of a knowledgeable 개인회생 전문가 (Personal rehabilitation expert) from the outset.
Lawset offers a different approach.
We provide a Case Pre-Arrangement service. Before any legal action is taken, we analyze your income, debt, and asset data against the current Korean insolvency laws. We verify your eligibility and project your likely monthly payments so you can make an informed decision.
Don’t guess with your financial future. Verify your data first.
Check your eligibility with Lawset’s Free Case Pre-Arrangement Service