- Published 2026.10.03 11:08
Four rounds of relief clear 3.8551 trillion won in bad debt for 183,000 people including basic livelihood recipients
Swift release of account seizures and telecom support aim to bring long-term small delinquent seniors back to economic activity
With data access secured, fund to launch precise repayment capacity screening in Q4 to curb moral hazard
The New Leap Fund has written off an additional 1.5968 trillion won (about $1.2 billion) of long-term delinquent debt to ease the burden on financially vulnerable borrowers. The fourth and largest write-off to date freed 183,000 people from debt. Since its launch, the fund has cleared a cumulative 3.8551 trillion won (about $2.8 billion) of non-performing debt across four rounds, and from the fourth quarter of this year it plans to expand debt relief to ordinary borrowers using its asset tracing authority.
The Financial Services Commission said on Oct. 3 that the New Leap Fund has finalized debt relief of this scale, focusing on socially disadvantaged groups such as basic livelihood recipients. With this, 452,000 people—32.8% by debt amount and 47.2% by number of borrowers—have had their debts fully cleared out of the 11.7378 trillion won (about $8.7 billion) of long-term delinquent debt (957,000 borrowers) the fund secured in cooperation with the financial sector.
◇ Small debts overdue for more than 10 years account for over 80%... Moving beyond book treatment to help return to daily life
The cleared debt reflects the reality of elderly vulnerable borrowers who were excluded from mainstream economic activity after being trapped in long-term small debts. Among those written off this time, borrowers aged 50 or older accounted for 90.7%. Those in their 60s made up the largest share at 38.2%, followed by those in their 50s at 27.5% and those 70 or older at 25.0%, meaning most had effectively entered retirement. Of the total debt written off, 88.6% had been delinquent for more than 10 years, and the average debt per person was only 8.71 million won. In particular, small debts of 20 million won (about $14,760) or less accounted for 87.1% of the total.
The New Leap Fund is a public institution that purchases unsecured non-performing loans of 50 million won (about $36,900) or less that have been delinquent for seven years or more, prevents excessive collection, and forgives the debt. In this fourth write-off, the fund selected borrowers who had completely lost repayment capacity and debt that had become legally unrecoverable and forgave them in a lump sum. The write-off included 663.8 billion won (about $490 million) (62,000 people) in debt eligible for exemption from screening, such as basic livelihood recipients, 830.6 billion won (about $613 million) (110,000 people) in debt for which legal rights could no longer be exercised due to expiration of statutes of limitations or death, and 214.9 billion won (about $159 million) (20,000 people) in debt with confirmed bankruptcy or discharge decisions from courts. The fund began its first write-off of 1.1305 trillion won (about $834 million) in December 2025, centered on Korea Asset Management Corporation, followed by a second round of 628.6 billion won (about $464 million) and a third of 499.2 billion won (about $368 million).
Debt relief goes beyond simple book treatment of losses and leads to practical support for borrowers' self-reliance. For borrowers whose debt write-off has been confirmed, legal enforcement measures such as account seizures that have long squeezed their livelihoods are swiftly lifted, and the fund covers all associated costs. To prevent disconnection of communications, the fund supports basic fees for budget phone service for up to two years, and in cooperation with Korea Inclusive Finance Agency and Korea Legal Aid Corporation, provides one-on-one job placement and customized financial counseling. The fund plans to send individual notification messages to those eligible for write-off starting in mid-October.
◇ Asset tracing authority gained through Credit Information Act revision... Post-management system will determine success
Starting with this write-off, a major change occurs in the fund's operations. The revised Credit Information Use and Protection Act took effect on Aug. 13, expanding the institutional foundation. Under the revised law, the fund secured authority to access not only financial assets but also virtual assets, income, and property-related public data.
Until now, the fund has prioritized writing off debt of vulnerable groups with clear objective evidence, such as basic livelihood recipients, and debt whose legal effect has expired. Going forward, however, it will begin precise repayment capacity screening for ordinary long-term delinquent borrowers based on the newly acquired data. It plans to carry out additional write-offs in the fourth quarter of this year for debt determined to be effectively unrepayable.
Moral hazard controversy, which arises whenever large-scale debt relief policies are implemented, is an issue authorities must resolve. Concerns have been consistently raised about fairness with ordinary people who faithfully repay their debts and the possibility of inducing intentional delinquency. Financial authorities plan to strengthen post-management by excluding from write-off any borrower found to have hidden assets or income through the multi-faceted asset tracing system and canceling debt adjustments. How much the fund can improve the precision of ordinary borrower screening and quarterly regular write-offs so that benefits go only to marginal borrowers with no repayment capacity is expected to be a key indicator of the fund's successful establishment.
(Dollar figures are approximate, converted automatically at 1,000 won = $0.738, the rate on Nov. 9, 2026.)
※ This article is an AI translation of the Korean original published by Korea Credit News; it was checked by automated quality guards and published by the English edition desk.
