Fraud by a borrower who filed for individual rehabilitation

Scope of effect of individual rehabilitation discharge

There are cases where a debtor, without repaying money, applies for individual rehabilitation or bankruptcy.

For ordinary debts, if individual rehabilitation or bankruptcy proceedings have been completed and a discharge decision has been granted, the debtor is no longer responsible for repayment.

However, the effect of discharge does not extend to taxes, fines, damages arising from an intentional tort by the debtor, or damages arising from a tort in which the debtor, through gross negligence, infringed on another person's life or body.

In other words, even if a discharge decision has been granted, the debtor remains responsible for repaying damages owed to others due to a tort.

Therefore, if a debtor applies for individual rehabilitation or bankruptcy with the intent not to repay money, it is important for the creditor to file a criminal complaint against the debtor for fraud and have the debtor criminally punished.

During the investigation or trial, the debtor is likely to pay the creditor a settlement amount, and even if a settlement is not reached, the creditor can easily secure an enforcement title based on a conviction.

Recently, attorney Joo Youngjae filed a criminal complaint for fraud against a debtor who had applied for individual rehabilitation, had the debtor punished, and subsequently obtained a payment order. We will introduce this case.

Facts

The client (complainant) lent 500,000 Korean won starting around April 2020, when the respondent, whom the client knew from college, asked, "I urgently need money for family matters. If you lend me money, I will repay it within a week." By October 13, 2020, the client had lent a total of 11,400,000 Korean won.

However, the respondent made various excuses, did not repay a single won, disappeared, and later applied for individual rehabilitation.

The client learned that if the individual rehabilitation application was accepted, they would receive only about one-tenth of the amount lent, and requested help from attorney Joo Youngjae.

Attorney Joo Youngjae's response

As soon as attorney Joo Youngjae took the case, he analyzed the statements and materials submitted by the respondent in the individual rehabilitation case to verify whether the respondent had deceived the client regarding the ability to repay or the use of the loan.

As a result, attorney Joo Youngjae learned that at the time the respondent borrowed money from the client, the respondent already had significant debt, lacked the ability to repay by the promised date, and the borrowed money was not actually used for family matters but was given to the respondent's boyfriend.

Accordingly, attorney Joo Youngjae filed a criminal complaint with the police, stating that the respondent had deceived the complainant regarding the ability to repay and the use of the loan, thereby defrauding 11,400,000 Korean won.

Decision of the investigative agency and the court

Based on the complaint and opinion written by attorney Joo Youngjae, the police began an investigation, referred the respondent to the prosecution on charges of fraud, and the prosecutor immediately sought a summary order. The court issued a summary order of a fine of 5,000,000 Korean won.

The summary order became final as the respondent did not request a formal trial, and attorney Joo Youngjae immediately filed a payment order for damages, which also became final.

In the end, the client was able to receive the full amount lent, plus interest, even though the debtor had received an individual rehabilitation discharge.