Personal Rehabilitation in Korea: Pay 43M, Discharge 100M — 2026 Full Guide

Last year, one of my consulting clients walked into my office carrying a stack of debt statements totaling 130 million won — credit cards, card loans, two personal loans, and one second-tier lender. He was paying 2.1 million a month just in interest and making zero progress on principal. After we ran the numbers and worked with a rehabilitation attorney, the court approved a monthly repayment of 1.45 million won over 3 years. Total repaid: about 52 million. Everything else — roughly 78 million — was legally discharged.

Korea's personal rehabilitation (개인회생) system is probably the single most misunderstood legal tool I see in my practice. People either think it's the same as bankruptcy (it isn't), or they assume it'll destroy their life forever (it won't). If you have regular income but the monthly interest alone is eating you alive, rehabilitation might be the most practical path forward. Let me walk through 2026 rules with real numbers.

What personal rehabilitation actually does

Rehabilitation is a court-supervised debt-adjustment program under the Debtor Rehabilitation and Bankruptcy Act. You file a petition, the court freezes all creditor collection the day it issues a commencement order, you pay an affordable amount monthly for 3 years (wage earners) or 5 years (self-employed), and whatever is unpaid at the end is legally erased. You keep your apartment, your car under 18 million won in value, your household goods, and most importantly your job.

The part people miss is how fast the commencement order kicks in. In Seoul District Court, most cases I've seen get a commencement order within 30 to 45 days of filing. From that day, wage garnishments stop, debt collector calls stop, and lawsuits are suspended. For someone being harassed daily by collection agencies, that alone is worth the entire process.

2026 eligibility — three hard requirements

• Debt ceiling: unsecured debt (cards, personal loans, card loans) under 1 billion won; secured debt (mortgages, chonsei loans) under 1.5 billion won. Over 95% of applicants fall well under these limits — the average case I see is 50 to 150 million in unsecured debt.
• Regular income: you need at least 1.8 million won net monthly from salary, business, pension, or gig work. Rehabilitation is only for earners. If you have zero income, you're looking at personal bankruptcy (개인파산) instead.
• Insolvency proof: you must show debt payments exceed capacity. The standard test: if monthly minimum payments plus essential living costs exceed your take-home pay, you qualify. No prior rehabilitation discharge within the past 7 years, and no fraudulent debt (gambling concealment, loans taken with no intent to repay).

How the monthly repayment is calculated

The formula is brutally simple: monthly repayment equals your monthly income minus court-approved living expenses. The court uses Ministry of Health and Welfare median income figures as the baseline — not your actual spending. If your real rent is 800,000 won but the court-recognized housing allowance is 450,000, the 350,000 difference goes to creditors, not your landlord. This is where people underestimate how tight 3 years will feel.

The 2026 court-recognized living expenses are roughly 1.3M for a single household, 2.1M for two, 2.7M for three, and 3.3M for four. Dependents meaningfully lower your required repayment — a 4-person household on 3.2M income might only need to repay around 500,000 a month. But note: lower repayment doesn't mean automatic approval. The court still checks whether creditors are getting at least what they'd receive under liquidation (the 청산가치 test).

Costs you'll actually pay

• Court fees: about 130,000 to 230,000 won total (stamp duty + service fees). This is the cheap part.
• Attorney fees: 1.5 to 3 million won for full representation. Complex cases with many creditors or disputed debts trend higher.
• Legal scrivener (법무사) fees: 800,000 to 1.5 million won. Cheaper, but scriveners can't represent you in hearings — fine for straightforward cases, risky for contested ones.
• Most firms allow installment payments, often stretched over the 3-year repayment period so you don't need the full amount up front.

Life after the discharge order

The moment the court grants discharge, your remaining debt legally disappears. Creditors cannot come after you for it — ever. But your credit recovery is a separate, slower process. The rehabilitation record itself stays on your credit file for about 5 years after discharge, though its practical impact fades significantly after year 2.

• Year 1 post-discharge: you can open a debit card, set up utility auto-debits, and start rebuilding a clean payment record. Score typically sits in the 500-600 range.
• Year 2: secured credit cards and small credit cards (100-300K limit) become accessible. Some card companies have specific post-rehabilitation products.
• Year 2-3: small unsecured personal loans available, typically at 8-15% rates from secondary lenders. Primary bank loans remain difficult.
• Year 3-5: mortgage eligibility returns if you have a stable 2+ year salary history. Interest rates will be 0.3-0.8%p higher than prime for the first mortgage, but normalize quickly.

Rehabilitation vs. bankruptcy — which one fits

My rule of thumb: if you can cover essential living expenses plus at least 400,000 won toward repayment every month, rehabilitation is almost always the better path. Bankruptcy is for people whose income genuinely cannot cover rent and food, let alone creditors. The asset protection alone makes rehabilitation the default choice for most working adults.