Editorial: Nearly 100,000 Entered Debt Restructuring in the First Half, More Support Needed for Recovery

Nearly 100,000 vulnerable borrowers entered debt restructuring in South Korea during the first half of the year, a sharp sign of how loans taken during the pandemic and domestic downturn have reached their limits.

Data from the Credit Counseling and Recovery Service showed 97,199 finalized cases through the first half, covering 5.7426 trillion won in debt. The number of people entering restructuring rose from the 110,000 range in 2020 and 2021 to the 160,000 range in 2023, then reached 189,000 last year. If the current pace continues, this year’s total could approach 200,000.

Debt restructuring can reduce principal and interest or adjust interest rates and repayment periods. That offers long-term delinquent borrowers a formal route to ease repayment and rebuild their finances. The increase in such cases is therefore not entirely negative, since borrowers are using a public process rather than facing private collection efforts. The deeper concern is that more people are losing the ability to repay in the first place.

Among vulnerable borrowers, defined as people with debts at three or more financial institutions and either income in the bottom 30% or a credit score of 664 or below, the average delinquency rate across the financial sector rose from 6.8% in 2021 to 10.9% in the first quarter of this year. The rate for vulnerable self-employed borrowers climbed from 5.3% to 12.7%. New cases of serious delinquency lasting at least 90 days increased from 180,000 in 2021 to 290,000 last year, while the total number of long-term delinquent borrowers reached 930,000 at the end of last year.

The editorial attributes the buildup partly to the government’s pandemic response, which relied mainly on loans instead of fiscal compensation for losses. With the domestic slowdown lasting longer than expected, debt accumulated. The prospect of higher market lending rates adds pressure. The editorial urges expanded early restructuring and more ambitious help for self-employed workers and small businesses, as well as faster implementation of a government program designed to support recovery and business capacity beyond simple debt forgiveness.