Effectiveness of debt modification system in Korea

• Published in: Seonmul yeongu (Online) Vol. 31; no. 4; pp. 262 - 277
• Main Authors: Lee, Kye moon, Yi, Junesuh
• Format: Journal Article
• Language: English
• Published: Emerald Publishing 01.11.2023; 한국파생상품학회
• Subjects: Credit score; Debt management plan (DMP); Debt modification system; Fresh start; Personal rehabilitation (Chapter 13); 경영학
• ISSN: 1229-988X; 2713-6647; 2713-6647
• DOI: 10.1108/JDQS-02-2023-0003

– This study aims to examine the effectiveness of the debt modification system (DMS) in Korea. We find that DMS does have a positive effect in increasing the credit scores and annual income of DMS users. We also find that a debt management plan (DMP) is more effective in raising credit scores than personal rehabilitation (PR). However, the credit scores of DMS users in the first half of 2019 (551.1–626.1 points) are at a very low level, making it difficult to access low-interest unsecured loans from banks. Therefore, DMS in Kores is still insufficient to support the return of debt-ridden consumers to normal financial life and provide opportunities for a fresh start.