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Effectiveness of debt modification system in Korea

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  • Kye moon Lee
  • Junesuh Yi

Abstract

- 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.

Suggested Citation

  • Kye moon Lee & Junesuh Yi, 2023. "Effectiveness of debt modification system in Korea," Journal of Derivatives and Quantitative Studies: 선물연구, Emerald Group Publishing Limited, vol. 31(4), pages 262-277, July.
    • Handle: RePEc:eme:jdqspp:jdqs-02-2023-0003
    DOI: 10.1108/JDQS-02-2023-0003
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    More about this item

    Keywords

    Debt modification system; Personal rehabilitation (Chapter 13); Debt management plan (DMP); Fresh start; Credit score; G18; G20; G28;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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