"Receive a 90% reduction through the personal rehabilitation system encouraged by the government."
This is a frequently appearing advertisement phrase on social media platforms like YouTube and Instagram. "Even if you're not thinking about rehabilitation right now, check the reduction amount" "How to reduce loan payments by 90% through government programs" and other phrases that entice individuals by promising to alleviate loan burdens stand out. Some advertisements even boldly reveal themselves as the 'government debt reduction support center' alongside the official logo of the Republic of Korea. When you click on the link in the advertisement, thinking it's a public institution, you will find that it leads to a law firm consultation.
Recently, as Lee Jae-myung's government's bad bank has become a hot topic, advertisements for personal rehabilitation are proliferating on social media. Not only lawyers but also individuals who lack qualifications to represent personal rehabilitation services are actively promoting their 'solution' services. The problem is that many of the recently frequent solution advertisements encourage the misuse of personal rehabilitation by claiming, "We can help you reduce any debt." This is a marketing tactic that stimulates curiosity about whether one can eliminate their debt amidst the government's bad bank policy of extinguishing delinquent debts.
The identities of those engaged in solution advertisements are diverse. Small to medium-sized law firms directly place advertisements, while sometimes involved are loan brokers, lending companies, and illegal moneylenders. While the advertisement sponsors differ, their goal is singular: to increase personal rehabilitation commissions and profit. First, loan brokers and lending companies act as middlemen. They lure debtors by claiming to offer solution or consulting services. The brokers guide them on how to meet personal rehabilitation criteria and connect them with collaborating lawyers. Brokers receive commissions from lawyers during this process.
There are several problems with these solution marketing practices. First, there are legal implications. It would be a violation of the Lawyer Act for individuals without a legal qualification to engage in some advocacy related to debt adjustment and to hand over cases to lawyers for a fee. Additionally, solutions involving brokers can also impose disadvantages on debtors. Typically, the cost to hire a personal rehabilitation lawyer ranges from 2 million to 5 million won. Of this, brokers take about 20-30% as a commission. From the lawyer's standpoint, as they must pay the broker's commission, they end up charging debtors more.
Most importantly, the consulting activities of solution brokers expose debtors to unexpected risks. Brokers deceive debtors into thinking they can receive debt adjustments by misrepresenting various conditions. They encourage them to disguise the usage of loan funds or to conceal some evidence documents. However, legal experts state that there is a high likelihood of detection for wrongdoing during the personal rehabilitation process if brokers' advice is followed. If these wrongdoings are uncovered, the responsibility solely falls on the debtor. They could face allegations of committing fraud against the court beyond merely failing personal rehabilitation.
Jung Il-woo, a responsible attorney at Daeryun Law Firm, noted, "Recently, false information related to personal rehabilitation is flooding in. The safest method is for debtors to directly seek consulting from bankruptcy specialists."
Moreover, the solution marketing occurring in the underground is also harmful to our society. It promotes moral hazard by suggesting that "one doesn't have to repay loans." Furthermore, the misuse of personal rehabilitation increases social costs. The intent of the system, which should only benefit those in dire need, is being tainted. Yoon Jeong-won, head of the Korea Legal Aid Corporation (KLAC) personal rehabilitation and bankruptcy support center, emphasized, "There should not be cases where individuals use personal rehabilitation simply because they don't want to repay their money right away," adding, "If unnecessary personal rehabilitations increase, it will erode public resources and escalate social costs."