The Financial Services Commission and the Korea Asset Management Corporation (KAMCO) launched a new long-term debt restructuring program (“New Leap Fund”) intended to support small merchants and vulnerable groups on October 1.
A Summary of FSC Chairman’s Remarks
FSC Chairman Lee Eog-weon attended the launching event and delivered congratulatory remarks, highlighting the significance of “New Leap Fund” as more than just a debt workout program. Vulnerable groups and small merchants have continued to suffer from increased debt payment challenges since the pandemic era. In this regard, Chairman Lee said that this program will provide a new foundation to leap forward for many of those who have not been able to engage in normal economic activities due to their delinquent debt status. To prevent moral hazard in the future, Chairman Lee said that authorities will make sure to carry out rigorous evaluations on debtors’ repayment capabilities. Chairman Lee also stated that authorities will work to expand support for those who have been diligently making debt payments but fall outside the qualification under this program, while continuing to work on providing more fundamental solutions that can help to resolve the problem of long-term debt delinquency.
Further Plan
The “New Leap Fund” program will start purchasing delinquent debts in October from the creditor institutions that have signed an agreement for about a year. From then, a rigorous examination of debtors’ wealth and income situations will be carried out before proceeding with the write-off or restructuring process from 2026. However, for those under the basic living welfare assistance program, a prompt write-off process will be made available in 2025 without examining debtors’ repayment capabilities. The total size of long-term delinquent debts qualified for support under this program is forecast to be about KRW16.4 trillion with about 1.134 million individuals receiving benefits.
Since the program will directly purchase delinquent debts from the creditor institutions that have entered into an agreement with, there is no separate application process for individual debtors. Debtors will be notified when their debts are purchased by “:New Leap Fund” and after the completion of examination on their repayment capabilities. Individuals can check progress and evaluation status on the program’s website (www.newleap.or.kr).
Meanwhile, the FSC plans to make available support measures for those falling outside the coverage of the “New Leap Fund” program. For debtors with 5-year or more overdue debts, the same level of special debt restructuring support (principal reduction of up to 80 percent and installment payment of up to 10 years) will be provided for three years by the Credit Counseling and Recovery Service (CCRS). For those with 7-year or more overdue debts that have already entered into a restructuring process, low-interest loans will be provided in the amount of about KRW500 billion over three years.
In addition, the FSC will continue to make efforts to assist vulnerable groups through ties to the employment and welfare assistance programs and work to prepare additional improvement measures in the fourth quarter of this year.
* Please refer to the attached PDF for details.