Korean Lawyer Explains Debt Collections In South Korea – Overview

You have unpaid receivables from a Korean company or personnel. The Korean counterpart doesn’t reply or refuses/delays the payment arguing some unacceptable reasons. The Korean counterpart might be acting in a hope that the long distance between the two works in their favor.  You may also feel helpless or sometimes frustrated confronted by language barriers and different laws.

That is the time to consider hiring a local lawyer. The Korean business and litigation lawyer can guide you through the whole process of debt collections in South Korea.

In this article, our Korean debt collection lawyer explains the several basic legal steps widely and generally taken to collect debts or unpaid money claims here in Korea.

There is one common mistake often found in foreign creditors. They contact Korean law firms at a quite late stage or even sometimes the final stage of disputes. This might cause some serious negative effects on the entire process of debt collection in Korea. The foreign creditors might be in peril of, for example, missing important legal prerequisites to make claims under Korean law, failing to procure supportive evidence, or even making mistakes to detrimental manifestation during negotiation or communication with the Korean counterparts.

When it comes to legal matters, the sooner involvement of lawyers is always better and highly recommended. It is more important when you are doing business in Korea. High rates of nonpayments, making use of foreign parties’ unfamiliarity with Korean law and business practices, and fraudulent business solicitations are common in Korea.

Of course, hiring a foreign legal professional is expensive and Korea is no different. In this regard, our office is providing a legal process outsourcing program. It is like having a Korean lawyer on your legal team on a continuous basis with minimum costs.

Read Further: Outsource the Legal Department for Your Business in Korea

Seize Debtor’s Asset in Korea

It is a good and powerful way of collecting to seize the debtor’s assets in Korea before launching a lawsuit or even a negotiation. This can minimize the risk of getting nothing after getting a money judgment. There are many Korean debtors who hide their assets when they expect a collection attempt soon to come. Of course, seizing the debtor’s asset requires more in-depth legal review and consideration of the business relationship with the counterparts.

In Korea, foreign creditors can seize the debtor’s assets before or after filing a suit. It can be accomplished by getting a provisional attachment order from the court.

Read More: Provisional Attachment of Assets under Korean Law – How to Secure Your Monetary Claim Effectively in Korea

You can even get this preliminary attachment when you have a case pending with a foreign court.

Read More: Does Korean Court issue a Provisional Attachment Order in Support of the Proceedings in the Merit in Foreign Courts?

Send a Formal Demand Letter in the Name of a Korean Lawyer

In many cases, the first legal step of debt collection is sending a formal demanding letter in the name of a Korean lawyer or a law firm.

This is optional, but there is a possibility of voluntary repayment by the Korean debtor after receiving an official legal letter from a Korean lawyer.  It is effective especially when the debtor in Korea misconceives that foreign companies or personnel cannot find a way to collect the money in Korea.

File a Request for Payment Order to the Korean Court

This is also optional.  A payment order is a much more convenient, fast, and inexpensive way to get a judgment compared to a lawsuit.  The Korean court has a tendency to issue payment orders easily.  The court issues a payment order without questioning the debtor because it is a summary proceeding. 

If no objection is raised from the debtor within 2 weeks from the date when the debtor received the order, the payment order has the same effect as a final and conclusive judgment.  If the debtor files an objection, the court proceeds to a trial against the same debtor(hearings and rendering money judgment).

File a Lawsuit

If the debtor still refuses to pay regardless of receiving your demanding letter, then you have no choice but to file a lawsuit.

It should be checked whether the debtors have enough assets in Korea before filing a lawsuit. 

Enforce Your Monetary Judgment by a Compulsory Execution

If you succeed in getting a final and conclusive judgment from the court, but the debtor still refuses to pay, you can enforce your judgment by filing a compulsory execution against the debtor’s assets in Korea.

Do you already have a final money judgment from a foreign country? Then you can enforce it, too, by getting an execution order from the Korean court.

Read More: Recognition and Enforcement of Foreign Judgments in South Korea

Registration for the Public Notice of Defaulting Korean Debtor

Any defaulting debtors who fail to pay the debts within 6 months from the registration of the money judgment can be registered, by the creditor’s application, in a defaulting debtor list of the Korean court. This list is shared among the financial institutions. As a result, it could lead to a suspension of financial transactions. Thus, you can consider applying for this public registration against a Korean debtor.

File a Criminal Complaint against Defaulting Korean Counterpart

You might be surprised to see that many Korean creditors are filing criminal complaints against non-payers or defaulting counterparts.

For example, commercial banks accuse their defaulting credit card customers of fraud. A business partner in a joint venture files a criminal complaint against the other partner for misappropriating the joint venture asset.

There are many cases where these criminal complaints are successfully established and the debtors are punished by fine or imprisonment in Korea.

The most common legal ground for criminal accusations is fraud. For example, if a Korean debtor entered into a financial transaction/arrangement without either (i) having enough capacity or resources to perform his obligation under the contract or (ii) having no intent to perform his obligation, it constitutes fraud.

It is not rare that once served with a criminal investigation summon by the Korean police, the Korean counterpart comes to the creditor and proposes some voluntary payments. They need to have a settlement agreement from the accuser in order to make their cases dropped or lower the level of punishment.

Thus, you may consider filing a criminal complaint as the last resort if other measures turn out unsuccessful. It is especially effective against bad debtors who hide their assets to evade the enforcement of a civil judgment.

If you have any questions about debt collection in Korea and want to speak directly with our Korean qualified English speaking lawyer, please click the contact button below.  A real Korean lawyer, not a U.S. attorney hired by a Korean lawyer nor just an English-speaking staff, will help you competently.

© 2020 All rights reserved.

Because of the generality of this update, the information provided herein, which may or may not reflect the most current legal development, may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

1 Comment

  1. Lawyers at Chung & Partners were professional and supportive through a very trying time. I was able to get a satisfactory resolution to a tedious and, especially due to the pandemic, uncertain and further complex labor law/compensation related situation. I would whole heartedly recommend Chung & Partners. I’m very grateful to have worked with them.

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