In the first half of this year, corporate bankruptcy filings hit a record high since statistics began. Personal bankruptcy filings, which had been declining, were also the most since the COVID-19 outbreak.
Analysts said the prolonged period of high interest rates and sluggish domestic demand, along with the wind-down of financial support rolled out during COVID-19, is exposing the accumulated distress of marginal corporations and vulnerable borrowers.
◇ Corporate bankruptcies reach 1,299 in half a year… personal filings also up 10%
According to the Monthly Judicial Statistics on the 23rd, corporate bankruptcy filings received by courts nationwide in the first half of this year totaled 1,299, up 17.7% from the same period a year earlier. It is the highest first-half figure since the Unified Insolvency Act was introduced in 2006. Even the six-month tally this year surpassed the annual total of 1,069 in 2020, when COVID-19 spread.
By court, the Seoul Bankruptcy Court received the most corporate bankruptcy filings at 591. The Suwon Bankruptcy Court followed with 301.
Personal bankruptcy filings also turned upward again. First-half personal bankruptcy filings came to 21,899, up 10.3% from 19,857 in the same period last year. It was the highest since 2021, the height of the COVID-19 crisis.
Bankruptcy specialist attorney Park Gi-tae said, "Considering that about three-quarters of the reasons for personal bankruptcy stem from livelihood issues such as a lack of living expenses, the effects of high inflation and high interest rates appear to be the direct cause."
The rapid deterioration in the ability of corporations and self-employed people to repay debt is also reflected in bank arrears rates. According to the Financial Supervisory Service, as of the end of May, the overall loan arrears rate at domestic banks was 0.67%, the highest since 0.81% in Oct. 2016.
The small and midsize enterprise loan arrears rate was 1.00%, a record high in 11 years since 1.11% in May 2015. The loan arrears rate for sole proprietors also jumped to 0.84%, the highest since 0.92% in May 2013.
◇ As COVID-era financial support ends, accumulated distress becomes reality
Experts said that distress masked by measures such as loan maturity extensions and principal-and-interest repayment deferrals during COVID-19 is now leading to a rise in bankruptcies. Unlike the boom in some export sectors such as semiconductors, business conditions for small and midsize enterprises and self-employed people, who rely heavily on domestic demand, have been slow to recover.
Heo Jun-young, a professor of economics at Sogang University, said, "Unlike the boom in the semiconductor sector, corporations in other sectors are in a very difficult situation," and added, "As the financial support implemented during COVID-19 enters its end phase, the accumulated distress appears to have contributed to the recent increase in bankruptcies."
Corporations' ability to service interest remains weak. According to the "2025 Corporate Management Analysis Results" released by the Bank of Korea last month, the share of corporations with an interest coverage ratio below 100% last year reached 39.9%. This means 4 out of 10 corporations could not cover even interest expense with operating profit.
Accordingly, there are calls for restructuring and targeted support based on prospects for recovery rather than blanket financial support. Professor Heo said, "Through restructuring, it is necessary to identify corporations with prospects for recovery, and to focus industrial policy and financial support on corporations that are experiencing temporary difficulties but have growth potential."