CREDIT REPORT IN REHABILITATION / BANKRUPTCY CASES
DOMESTICATION OF FOREIGN JUDGMENT
If you wish to recover the debt without taking your business partner to court dispute, DEMAND LETTER will be a appropriate answer.
The purpose of DEMAND LETTER is to secure concrete evidence to prove that creditor has demanded for repayment against debtor in public transcript form.
If you send a DEMAND LETTER to debtor, the post office will make 3 copies of letter, send one to debtor, return one to creditor, and keep one at the post office.
The creditor can track the delivery status afterwards, of course. DEMAND LETTER can be a powerful evidence since the government (post office) keeps one of the original copies and the creditor can check if debtor has received the letter, which means, the debtor has been asked to pay for the unpaid balance.
By sending DEMAND LETTER, creditor can also stop the progress of statute of prescription. However, creditor should file a lawsuit within a certain period, in Korean Law, 6 months.
Before bringing your debtor to court, you can consider NEGOTIATION procedures first.
In NEGOTIATION procedures, your legal counsel will contact debtor and proceed negotiation regarding reimbursement of debt, including repayment schedule, interest matters, certain amount of deduction, etc.
NEGOTIATION services are usually accompanied by DEMAND LETTER, it is a lot faster than ordinary litigation procedures. But in case debtor refuses to make any further settlement with creditor, this procedure could make overall collection procedures take longer.
When both parties fail to find an amicable settlement in NEGOTIATION procedures, creditors are to choose next step, LITIGATION PROCEDURES.
ORDER OF PAYMENT
ORDER OF PAYMENT is one of the simplest and most basic procedure to initiate legal action against debtor.
In ORDER OF PAYMENT procedures, creditor can file the complaint to court. After reviewing the complaint, the court renders a ORDER OF PAYMENT and delivers the award to debtor.
When debtor does not appeal the court's decision, the ORDER OF PAYMENT becomes final and binding between two parties (creditor and debtor) and creditor can proceed compulsory execution (e.g. seizure on debtor's bank accounts).
In case debtor appeals the court's decision, the ORDER OF PAYMENT process is transferred to NORMAL CIVIL LAWSUIT, and the court sets pleading dates and summons both parties (or its counsels).
If debtor acknowledges its debt and do not make appeal the court's decision, ORDER OF PAYMENT can be cheaper and faster remedy for creditor to recover its debt. However, when debtor appeals, commencing NORMAL CIVIL LAWSUIT is faster remedy.
Many bad debtors seek for ways to conceal its assets aside and just ignores creditor's request for repayment.
When debtors comes to know that creditor have filed a civil lawsuit against them, they usually try to dispose its assets to third party and keeps their financial status bad. In this situation, obtaining a full-winning award from court would be useless because there is no asset left when the final award is rendered.
In this case, PRELIMINARY INJUNCTION will be adequate remedy for creditors to bind debtors' asset before they initiate main litigation procedures.
To proceed PRELIMINARY INJUNCTION, creditor should prove that (1) they have claiming right against debtors and (2) debtors are (or likely) to conceal its asset when they get to know litigation is started against them.
When court renders an order for PRELIMINARY INJUNCTION, creditor should pay certain amount of deposit to court. The court will render separate order for deposit to creditor.
PRELIMINARY INJUNCTION is not a standalone procedure, thus it should be accompanied by civil lawsuit.
CIVIL LAWSUIT is the most classic and effective legal remedy to recover your debt.
In CIVIL LAWSUIT, court sets several pleading dates and both parties can submit written briefs before each pleading dates.
In CIVIL LAWSUIT, each party shall prove its allegation pursuant to the principle of distribution of burden of proof. Unlike other pre-litigation procedures (e.g. order of payment, provisional seizures), both parties can ask for various kinds of evidence (e.g. documents, witness, etc.) to prove its claim.
After several hearing dates, the court sets date for final decision. And renders final award.
When the final award is rendered, losing party can choose whether to appeal within 14 days from the date of receipt.
Korean legal system allows 3-tier court procedures, from district court to supreme court.
COMPULSORY EXECUTION / OTHER
COMPULSORY EXECUTION can be considered when debtor refuses to pay even after the final award.
By COMPULSORY EXECUTION, creditor can seize / liquidate debtor's asset for satisfaction of its unpaid credit.
Seizure on bank accounts is the most frequently used and powerful method. Creditor can also choose to proceed seizure on debtor's real estate, bond for rental contract, or any other assets.
Unlike provisional seizures, COMPULSORY EXECUTION requires no court deposit since the creditor has secured (final and binding) award from court.
SPECIFICATION OF PROPERTY
When creditors fail to find debtor's asset for reimbursement. Creditors can REQUEST FOR SPECIFICATION OF PROPERTY to court pursuant to Korean Civil Execution Act Art. 61.
When court accepts creditors' request, it renders an order against debtor to attend the DATE OF PROPERTY SPECIFICATION and to submit LIST OF ASSET on the date. Debtors shall submit its LIST OF ASSET to court, including bank accounts, real estate, bonds, and other asset for reimbursement.
In case creditors find proper asset for reimbursement, COMPULSORY EXECUTION on the asset will follow.
Otherwise, debtors shall ask court for INQUIRY ABOUT PROPERTY.
When your debtor turns out to be bad enough not to make any reimbursement with no response, you can consider CRIMINAL CHARGE for larceny or embezzlement.
CRIMINAL CHARGE can put a pressure on debtor for reimbursement and thus can be an effective remedy for debt collection.
However, creditor should consider carefully if it can secure incriminating evidence in criminal court because criminal court sets high bar in pleading guilty for debtors.
REHABILITATION / BANKRUPTCY CASES
When creditor comes to find that DEBTOR is under BANKRUPTCY or REHABILITATION cases, it should report the court as a creditor and submit evidence for credit, not to lose the chance for recovery.
After reporting credit to BANKRUPTCY or REHABILITATION court, creditor shall attend the meeting of creditors / assembly of related persons, sometimes up to several times.
After BANKRUPTCY / REHABILITATION procedures, debtor shall pay according to its repayment plan or its asset shall be liquidated for compensation and creditor can recover certain part of its credit.
DOMESTICATION OF FOREIGN JUDGMENT
When creditor has secured final and binding judgment against debtor in foreign country but failed to find proper asset for reimbursement, and finds that debtor and its asset is an Korea, DOMESTICATION OF FOREIGN JUDGMENT (RECOGNITION OF FOREIGN COUNTRY JUDGMENT) is required.
In DOMESTICATION OF FOREIGN JUDGMENT, several requirements should be met to obtain court's recognition. That is, international juristiction, not being a default judgment, not undermining sound moral or social order, mutual guarantee or substantial identity between requirements of foreign judgment recognition of both countries.
In case debtor argues reduction of claim in the RECOGNITION case, the RECOGNITION case shall be proceeded as ordinary civil lawsuit and consecutive pleading dates will follow.
Please leave us an inquiry | Ask for a consultation