🚨 New Start Fund

Today Korean Social News for Beginners | 2025.10.09

0️⃣ 16 Trillion Won Long-Term Debtor Relief and Fairness Debate

📌 16 Trillion Won Debt Forgiveness 'New Start Fund' - Second Chance or Unfair Policy?

💬 The government has launched the 'New Start Fund' worth 16.4 trillion won to help long-term debtors. The fund buys debts that haven't been paid for over 7 years (up to 50 million won) and cancels or adjusts them based on income and assets. About 1.13 million people are expected to benefit. This program follows the National Happiness Fund from 2013, but has stricter rules and better monitoring. However, it has caused big debates about unfairness to people who paid their debts honestly, worries about moral hazard, and questions about fairness. The government says this is not just debt cancellation but a support system for economic restart, and promises strict income and asset checks plus registration of financial troublemakers.

💡 Summary

• The New Start Fund is a 16.4 trillion won government program that adjusts debts for people who haven't paid for over 7 years.
• It decides who gets help and how much by checking income and assets carefully.
• It provides a second chance but also causes social debate about fairness.

1️⃣ Definition

The New Start Fund is a government debt adjustment program where the government buys debts that haven't been paid for over 7 years and cancels part or adjusts repayment terms based on the debtor's income and assets. The goal is not just to cancel debts, but to give people in difficult economic situations a chance to restart their lives.

The Korea Asset Management Corporation (KAMCO) runs the fund, and the Financial Services Commission supervises it. This program follows the National Happiness Fund that started during the Park Geun-hye government in 2013, but has stricter selection standards and better monitoring systems.

💡 Why is this important?

• It gives people who cannot work normally due to long-term debt problems a second chance.
• About 1.13 million debtors can benefit and restart their economic lives.
• It is at the center of social debate due to fairness issues with honest payers.
• It is a large economic policy that uses 16 trillion won of government money.

2️⃣ Specific Details and How the New Start Fund Works

📕 Who Gets Help and Selection Standards

• Strict standards are used to select people. Main standards are:

  • Debts that started before September 30, 2018 and haven't been paid for over 7 years qualify.
  • Only small debts of 50 million won or less are included.
  • Only people who really cannot pay after checking income and assets get help.
  • People who hide money on purpose or spend on luxury items are excluded.
  • About 1.13 million people are expected to benefit, which is only part of all long-term debtors.

• Different levels of help based on income and assets. Main details are:

  • People earning 2.5 million won or less per month with almost no assets get 100% debt cancellation.
  • People earning between 2.5-3.5 million won get 70-90% reduction.
  • People earning between 3.5-4.5 million won get 50-70% reduction.
  • People with a certain level of assets get lower reduction or are excluded.
  • Asset checks include real estate, financial assets, cars, and more.

📕 How It Works and Follow-Up Management

• A systematic debt adjustment process is used. Main steps are:

  • Korea Asset Management Corporation buys long-term unpaid debts from banks and savings banks.
  • They carefully check debtors' income and assets by connecting with the National Tax Service and banks.
  • Based on the results, they decide on cancellation, principal reduction, interest adjustment, or longer payment time.
  • For people who cannot pay all at once, long-term installment payment is provided.
  • Even after debt adjustment, they regularly monitor changes in income and assets.

• Strict follow-up prevents fraud. Main measures are:

  • People who get reduction through false information are registered as financial troublemakers and cannot use banking for up to 12 years.
  • People who hide assets or lie about income on purpose are reported to police.
  • If people buy expensive assets or spend on luxury within a certain time after getting reduction, the reduced amount is taken back.
  • Regular follow-up checks evaluate how well the restart support program works.
  • Success stories are promoted, and fraud cases are strictly punished to build trust in the system.

💡 Key Points of the New Start Fund

1. Who qualifies: Over 7 years unpaid, debt under 50 million won, low income and assets
2. Size: Total 16.4 trillion won, about 1.13 million people expected to benefit
3. Method: Different reduction levels after checking income and assets (up to 100% cancellation)
4. Management: Financial troublemaker system, follow-up checks, fraud recovery
5. Purpose: Not just cancellation but support for economic restart

3️⃣ Expected Benefits and Controversies

✅ Positive Expected Benefits

• Helps long-term debtors restart economic activities. Main effects are:

  • Debtors who were in bad credit status for over 7 years can live normal economic lives.
  • They can get bank loans and credit cards, bringing back life stability.
  • Getting jobs or restarting businesses becomes easier, creating more income opportunities.
  • Family financial burden decreases and quality of life improves.
  • They are freed from psychological pressure and mental health can improve.

• Positive effects are expected for the macro economy too. Main changes are:

  • 1.13 million people's buying power recovers, helping activate the domestic economy.
  • Banks' bad debts are cleared, improving their health.
  • Prevents increase in long-term debtors, making financial markets more stable.
  • Strengthens social safety net, which can help reduce inequality.
  • Can become a leading example of inclusive growth policy led by government.

✅ Fairness Controversy and Concerns

• Honest payers feel relatively deprived. Main problems are:

  • People who honestly paid debts despite difficulties feel discriminated against.
  • The wrong idea that "if you don't pay debts, the government will cancel them" could spread.
  • Compensation for honest payers (interest refunds, low-rate loans) exists but complaints say it's not enough.
  • Unfair cases can happen where people in more difficult situations don't get benefits.
  • The value of "keeping promises" in society as a whole may be damaged.

• Moral hazard and system abuse are concerns. Main risks are:

  • Expectations may grow that if you intentionally don't pay debts and wait, the government will solve it.
  • Tricks like underreporting income and assets or hiding them on purpose may appear.
  • People who got help once might take on too much debt again, causing repeat problems.
  • Politicians might carelessly make similar policies to gain popularity, worsening fiscal health.
  • Banks might neglect risk management and increase bad loans.

4️⃣ Related Terms Explained

🔎 National Happiness Fund

• The National Happiness Fund is the predecessor debt adjustment program of the New Start Fund.
  • The National Happiness Fund is a long-term debtor relief program launched by the Park Geun-hye government in 2013, which bought long-term unpaid debts from banks and savings banks to adjust debts. After launching, it provided debt adjustment worth 49 trillion won to about 3 million people.
  • Main operation methods were: First, it targeted small debts of 10 million won or less that hadn't been paid for over 3 years. Second, it reduced up to 70% considering the debtor's income and assets. Third, Korea Asset Management Corporation ran the fund and the Financial Services Commission supervised it.
  • The New Start Fund is a program that fixes problems of the National Happiness Fund. It strengthened fairness by increasing the unpaid period to over 7 years, conducts stricter asset checks, and strengthened follow-up management. It can be called an improved version based on the achievements and limits of the National Happiness Fund.

🔎 Financial Troublemaker System

• The Financial Troublemaker System is a mechanism that punishes people who make dishonest financial transactions.
  • A financial troublemaker is someone who disrupted financial order through loan fraud, insurance fraud, providing false information, or hiding assets. The Financial Services Commission designates them, and they receive sanctions like limited financial transactions, loan bans, and credit card issuance refusal.
  • Reasons for designation as a financial troublemaker related to the New Start Fund are: First, unfairly receiving debt reduction by falsely reporting income or assets. Second, intentionally hiding assets or disguising them under someone else's name. Third, buying expensive assets or luxury spending within a short time after receiving reduction.
  • Sanction content and period vary by violation severity. Minor cases get 3 years, major cases get 5 years, and very malicious cases get up to 12 years of financial transaction restrictions. During the sanction period, normal economic activities are almost impossible, so it has a strong effect of preventing attempts to get benefits through dishonest methods.

🔎 Debt Adjustment

• Debt adjustment is a procedure to reasonably adjust debt burden according to the debtor's repayment ability.
  • Debt adjustment is a procedure where, when a debtor has difficulty paying debts, they adjust the principal, interest, repayment period, etc. through agreement with creditors or through courts or government agencies. It is a win-win plan that helps the debtor's economic restart while allowing creditors to recover some amount.
  • Main types of debt adjustment are: First, personal rehabilitation where courts lead and if you pay a certain amount for 3-5 years, the rest is cancelled. Second, personal bankruptcy where the debtor disposes of all assets, distributes them to creditors, and gets remaining debts forgiven. Third, debt adjustment by the Credit Counseling and Recovery Service where you agree with banks for interest reduction or longer repayment period. Fourth, there is government-led debt adjustment like the New Start Fund.
  • The New Start Fund's debt adjustment method is an administrative measure where the government buys debts and then unilaterally decides reduction rates after income and asset checks. It's fast and simple without court procedures, but has strict standards for selecting beneficiaries.

🔎 Moral Hazard

• Moral hazard means behavior that avoids responsibility and tries to gain dishonest benefits.
  • Moral Hazard is an economics term that describes a phenomenon where individuals or organizations are more likely to act irresponsibly or dishonestly when they believe they are protected from risk. Typical examples are people who have insurance taking more risks, or people neglecting debts expecting government support.
  • Three main moral hazard concerns related to the New Start Fund are: First, from debtors' side, awareness that "the government will solve it even if you don't pay debts" could spread, weakening the will to pay honestly. Second, from banks' side, they might neglect loan screening expecting the government will eventually buy the debts even if they make bad loans. Third, from politicians' side, there is risk of carelessly making similar debt cancellation policies to gain votes.
  • The government has prepared several mechanisms to prevent moral hazard. It increased the unpaid period to over 7 years to exclude short-term debtors, strengthened income and asset checks, and strictly punishes fraud through the financial troublemaker system. Also, it clearly states this is the last support to block repeated expectations.

5️⃣ Frequently Asked Questions (FAQ)

Q: Do people who honestly paid their debts get no benefits at all?

A: Compensation measures for honest payers are separately prepared, but there are criticisms that they are not enough.

• The government, aware of fairness controversy, announced several supplementary measures for honest payers. First, it refunds part of the interest paid by low-income people who steadily repaid debts over the past 7 years. Second, it provides benefits like interest rate cuts or longer repayment periods to people currently paying debts honestly. Third, it launches special low-rate loan products for low-income honest payers. Fourth, it is considering benefits like credit rating improvements or preferential financial transaction treatment.
• However, complaints remain that these compensation measures provide smaller real benefits compared to debt cancellation provided to long-term debtors. Especially people whose lives were harder because they honestly paid debts despite difficulties inevitably feel relatively deprived. The government said it will listen to these voices and prepare additional supplementary measures, but it is difficult to completely resolve the fundamental fairness issue.

Q: How can I get benefits from the New Start Fund?

A: Beneficiaries are automatically selected without separate application, and you go through a screening process after receiving notification.

• The New Start Fund does not require debtors to apply directly. Instead, Korea Asset Management Corporation buys long-term unpaid debts from banks and automatically selects beneficiaries. First, when the fund buys debts, it notifies the debtors by mail or text. Second, debtors who receive notification must agree to provide information about income and assets. Third, Korea Asset Management Corporation automatically checks income and assets by connecting with the National Tax Service and banks. Fourth, reduction rates are decided and notified based on screening results.
• Important points to note are: First, if you provide false information or hide assets, you are registered as a financial troublemaker and receive disadvantages instead. Second, if you haven't been unpaid for over 7 years or debt principal exceeds 50 million won, you are excluded. Third, if you have income or assets above a certain level, the reduction rate becomes lower or you may be excluded. Fourth, cases suspected of fraud or intentional debt default are also excluded. For details, you can contact Korea Asset Management Corporation call center (1588-3570).

Q: Is this New Start Fund the last debt adjustment opportunity?

A: The government emphasizes this is the last large-scale debt adjustment, but it could change depending on political situations.

• The government has repeatedly emphasized that this is the last large-scale debt adjustment program when announcing the New Start Fund. First, repeated debt cancellation policies can cause moral hazard and destroy financial order. Second, since one large support was already provided through the National Happiness Fund and this is the second chance through the New Start Fund, further repetition is difficult. Third, it is not sustainable as 16.4 trillion won of huge fiscal money is invested. Fourth, social backlash due to fairness issues from honest payers is large, so caution is needed.
• However, historically, politicians have repeated similar policies to gain popularity. The possibility of another debt cancellation policy appearing before elections to gain votes cannot be completely ruled out. Therefore, it is a very dangerous choice to intentionally not pay debts believing the government's announcement that "this is the last time." Even if a similar policy appears in the future, much stricter standards are likely to be applied then, and honestly fulfilling debt obligations now is more advantageous in the long term.

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