Law Firms Accused of Exaggerated '95% Debt Write-off' Ads, Inflating Fees for Vulnerable Debtors

Vulnerable individuals struggling with overwhelming debt are falling prey to law firms using deceptive advertising, promising dramatic debt relief and low fees, only to charge inflated prices and push clients into further financial distress.

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They said, 'If you don't sign with our law firm today, you can't sign later.' Hearing that in a desperate situation due to debt, I couldn't think of looking elsewhere and just signed.

One 20-something individual, burdened by tens of millions of won in debt, recounted being pressured by a law firm advertising "personal rehabilitation specialists." Despite being quoted 6 million won for services that could have been handled for a mere 50,000 won through the Credit Counseling and Recovery Service (CCRS), the individual felt compelled to sign due to the urgency and fear instilled by the firm. The law firm then demanded a 2 million won penalty for cancellation.

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I was deceived and felt despair.

Advertisements on platforms like YouTube and Instagram frequently tout "over 95% debt write-off" and "ultra-low fees." However, legal professionals describe these claims as misleading. While debt adjustment through CCRS is accessible to anyone with a 50,000 won application fee, and personal rehabilitation typically costs between 2 to 3 million won, the advertised firms often charge significantly more. Some firms allegedly quote low initial fees, only to add substantial charges for subsequent procedural steps, escalating the final cost to 6 to 7 million won.

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Some law firms omit such private loans from the list of rehabilitation creditors. If intentional omission is discovered, the rehabilitation process can be canceled, and even if not discovered, the private loan debt remains without being discharged.

Compounding the issue, some firms reportedly mislead debtors into believing they must contract with a law firm to access debt adjustment services. In other cases, firms have charged up to 10 million won for "debt adjustment consulting." Alarmingly, some law firms even facilitate new loans for clients unable to afford the fees, encouraging them to exhaust their credit card limits or even seek out loan sharks. This practice can lead to debtors taking on new, high-interest debt to pay for the very services meant to resolve their existing financial problems.

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There is significant information asymmetry in the debt adjustment market. It is necessary to first check your debt status and available systems at public debt adjustment institutions like the CCRS.