1.13 Million to Gain 16.4 Trillion Won Debt Relief

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Overview of the New Leap Fund

The government has launched a new initiative known as the “New Leap Fund,” which is designed to address long-term delinquent loans by purchasing and eliminating them from small business owners and vulnerable groups. This program is part of President Lee Jae-myung’s commitment to reduce the burden of debts carried by those in need. As a specialized institution, the New Leap Fund operates as a "bad bank," focusing on acquiring and resolving non-performing assets.

Who Qualifies for Full Debt Forgiveness?

Individuals or sole proprietors with debts of up to 50 million Korean won who have been delinquent for seven years or more and lack the ability to repay are eligible for full debt forgiveness. A total of 1.13 million people, with combined debts amounting to 16.4 trillion Korean won, fall into this category. Starting this month, the New Leap Fund will begin purchasing delinquent loans from financial institutions to forgive these debts.

To qualify, applicants must have an income of 60% or less of the median income (monthly income of 1.54 million Korean won or less for a single-person household, based on 2026 standards) and no recoverable assets excluding livelihood assets. Livelihood assets include:

  • Farmland, fish farms, or salt farms of 1,000 square meters (approximately 302 pyeong) or less, or with a publicly announced land value of 20 million Korean won or less, as well as inherited ancestral gravesites.
  • Small freight trucks under 1 ton and over 10 years old.
  • Financial assets of 1.85 million Korean won or less.

Debts of basic livelihood security recipients, disability pension recipients, severely disabled individuals, recipients of livelihood adjustment allowances or livelihood support funds, and veterans will be forgiven without repayment capacity assessment.

However, debts incurred from stock investments or by sole proprietors working in speculative or entertainment industries are excluded from forgiveness. Additionally, debts owed by foreigners are generally not eligible. However, permanent residents, marriage migrants, or recognized refugees included in this year’s livelihood recovery consumption coupon support program may qualify if they meet the conditions.

Partial Debt Forgiveness Programs Available

For those with income above 60% of the median or recoverable assets insufficient to cover debts, the government will offer several options:

  • Reduce principal by 30–80%
  • Allow repayment over 10 years
  • Waive all interest
  • Postpone repayment for up to three years

To address equity concerns regarding borrowers who diligently repay debts, the government will support borrowers with delinquency periods under seven years through the Credit Recovery Committee for three years, offering special debt adjustments (principal reduction up to 80%, installment repayment up to 10 years) at the same level as the New Leap Fund. Additionally, a separate program provides loans (500 billion Korean won scale) at interest rates equivalent to bank credit loans for those who have been delinquent for over seven years but are complying with debt adjustments.

Individual Notifications for Debt Forgiveness Recipients

Eligible individuals do not need to apply separately. Debts will automatically be extinguished as the New Leap Fund purchases qualifying loans in bulk from participating financial institutions. Recipients will be individually notified when financial institutions sell the loans to the New Leap Fund and when the fund completes the repayment capacity assessment.

The New Leap Fund will spend approximately 840 billion Korean won to purchase delinquent loans. Of this, 400 billion won will come from the second supplementary budget secured in June, and the remaining 440 billion won will be shared by financial institutions, including banks (360 billion won). Lee Eog-weon, Chairperson of the Financial Services Commission, stated, “We will minimize moral hazard by rigorously conducting repayment capacity assessments and ensure equity by expanding support for diligent repayers.”

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