(a) Where a corporate borrower is in financial difficulty and an unsecured debt has become due, would it be usual or customary for an unsecured creditor (particularly, a bank creditor) and/or the corporate borrower to attempt to negotiate some suitable arrangement for repayment of the debt before the creditor invokes legal recovery methods?

As noted above, most loans extended by banks are secured loans. In unsecured loans, the lenders and borrower often negotiate for suitable arrangement before the lenders seek formal legal recovery methods.

(a) What mechanisms are available under the legal system of this economy for unsecured creditors to collect debts owed to them by the corporate debtor?

An unsecured creditor may file a petition with the court for compulsory attachment or seizure to preserve the assets of the debtor. The petitioner may then seek execution against the assets.

(b) In practice, which method(s) of recovery of unsecured debts are most commonly employed by unsecured creditors of a corporate debtor?

The method described above is the method used in Korea.

E3. Effectiveness of judicial system

(a) How effective is the judicial and court system for the purposes of debt collection?

Korean judicial and court system is reasonably effective for the purposes of debt collection.

(a) What effect, if any, does the commencement of insolvency proceedings against a corporate debtor have on debt recovery proceedings?

Generally, other than the exceptions recognized in the insolvency laws, all acts for debt recovery will cease with the commencement of an insolvency proceeding.

(b) What effect, if any, does the formal pronouncement of an insolvency administration in respect of the corporate debtor have on debt recovery proceedings?

Once insolvency administration is formally determined by the court, the terms of debt recovery (e.g., recovery, interest, period, etc.) will depend on the terms of the decision by the court.