PRE-LITIGATION

If you want to recover the debt without bringing the case to the court, DEMAND LETTER will be an appropriate remedy.

The purpose of DEMAND LETTER is to secure concrete evidence to prove that the creditor has demanded for repayment against the debtor. 

If a DEMAND LETTER is filed to the post office, the post office will conduct delivery in following working days. The result of delivery is reported.

The creditor can track the delivery status afterwards, of course. DEMAND LETTER can be a strong 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 interrupt the progress of statute of prescription. However, such interruption is valid for only 6 months - creditor should file a lawsuit within 6 months - if Korean law is applicable.

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 is a simple way to initiate legal action against the debtor. 

In ORDER OF PAYMENT procedures, the creditor can file the complaint to the court. After review, the court renders an ORDER OF PAYMENT and the order is delivered to the debtor.

When debtor does not appeal the court's order, the ORDER OF PAYMENT becomes final and binding between the two parties and the creditor can start compulsory execution process (e.g. seizure on debtor's bank accounts). 

In case the court's order is appealed by the debtor, the ORDER OF PAYMENT process is transferred to NORMAL CIVIL LAWSUIT, and the creditor is ordered to pay additional court costs for normal litigation procedures.

If the debtor acknowledges the debt and does not appeal the court's decision, ORDER OF PAYMENT could be a good choice.

However, when debtor appeals, NORMAL CIVIL LAWSUIT could be a better option.

Some debtors, upon learning of a lawsuit filed, empty their accounts and transfer their assets to others to prepare for future enforcement.

In these situations, even if a favorable judgment is obtained, it can be difficult to collect money from the debtor.

To prevent this situation, a PRELIMINARY INJUNCTION can be used to freeze the debtor's assets before litigation begins.

To proceed obtain the court's order for a PRELIMINARY INJUNCTION, the creditor must prove their rights against the debtor and explain to the court the need for a preliminary freeze of the debtor's assets.

Since a court order for PRELIMINARY INJUNCTION freezes the debtor's assets prior to the main lawsuit, a certain percentage of the assets must be deposited in cash or a surety insurance policy must be purchased.

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 cannot be pursued alone and must be preceded by a main lawsuit.

CIVIL LAWSUIT is the most common and effective legal means of collecting debts.

In CIVIL LAWSUIT, the court sets several hearing dates, and both parties can submit written responses before each hearing date.

In CIVIL LAWSUIT, each party must prove its case based on the principle of shared burden of proof. Unlike other pre-litigation procedures (e.g., payment orders, provisional seizures), both parties can request various types of evidence (e.g., documents, witnesses, etc.) to support their claims.

After several hearing dates, the court sets a final judgment date and issues a final ruling.

Once a final judgment is issued, the losing party may appeal within 14 days of receiving the judgment.

The Korean legal system has a three-tiered trial system, from district courts to the Supreme Court.

COMPULSORY EXECUTION (ENFORCEMENT) may be considered if the debtor refuses to pay even after a final judgment has been issued.

COMPULSORY EXECUTION (ENFORCEMENT) allows a creditor to seize or liquidate the debtor's assets to satisfy the unpaid debt.

Attacking bank accounts is the most common and powerful method. Creditors may also seize the debtor's real estate, lease deposits, or other assets.

Unlike a PRELIMINARY INJUNCTION, COMPULSORY EXECUTION (ENFORCEMENT) does not require a court deposit because the creditor has secured a final and binding judgment from the court.

If a creditor cannot locate the debtor's assets subject to payment, the creditor may request the court to verify the debtor's property register pursuant to Article 61 of the Civil Execution Act.

If the court accepts the creditor's request, it will order the debtor to appear on the property register verification date and submit a list of assets. The debtor must submit a list of assets, including bank accounts, real estate, receivables, and other assets subject to payment, to the court.

If the creditor finds suitable assets subject to payment, enforcement proceedings will commence against those assets.

If the creditor fails to do so, the debtor may request the court to conduct a property investigation.

If the debtor refuses to pay without any response, CRIMINAL CHARGES for theft or embezzlement may be considered.

CRIMINAL CHARGES can be an effective means of debt collection, as it pressures the debtor to repay.

However, because the standard for a defendant to plead guilty in criminal court is extremely high, creditors must carefully consider whether they can secure evidence to prove guilt in a criminal trial.

Upon learning that the debtor has entered bankruptcy or rehabilitation proceedings at the court, creditors must report to the court and submit supporting documentation to avoid missing out on opportunities to collect their claims.

After filing their claims with the bankruptcy or rehabilitation court, creditors must attend a creditors' meeting or a meeting of interested parties, which may require multiple attendances in some cases.

Once the bankruptcy or rehabilitation proceedings are completed, the debtor may repay their debts according to the repayment plan, or the debtor's assets may be disposed of, allowing creditors to recover a portion of their claims.