No “Squid Game”: South Korea’s Real Debt Trap

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Many small business owners in South Korea identify with the cash-strapped characters of Netflix’s hugely popular drama “Squid Game”, who vying for a chance to win $ 38 million, exposing a debt that is all too familiar.

Near retirement at 58, Yu Hee-sook paid off his debts a long time ago, but still receives calls from collection agencies threatening to foreclose his bank accounts, as the loans were securitized and sold to investors at his knowledge.

“In Korea, it’s like the end of the world once you become a credit delinquent,” said Yu, who has been content with odd jobs like writing for movie magazines for the 13 years. that it took to pay off the debts she incurred during a film that flopped in 2002.

“All I wanted was a chance to pay off the debt, but the banks won’t let you make any money,” added Yu, who feels trapped in a ruthless, lifelong ordeal just like the 456s. participants in the “Squid Game” television game.

While foreigners may associate South Korea with the BTS boyband and sleek Samsung smartphones, the drama shows a grim flip side of the rise in personal borrowing, the highest suicide rate among advanced nations, and the scarcity of freeing oneself. debt.

Record household borrowing is fueling private investment and housing growth, but ruthless social mores around debt often blur the line between personal and business loans, weighing on those running small businesses.

Personal bankruptcies hit a five-year high of 50,379 last year, according to court documents.

The proportion of those falling behind on more than one type of personal debt payment rose steadily to 55.47% in June, from 48% in 2017, according to figures from Korea Credit Information Services.

“If Donald Trump was a Korean, he probably could not have become president, having filed for bankruptcy,” said a lawyer in Seoul specializing in personal bankruptcy.

“In the United States, corporate debt is more separated from personal debt. “

An inadequate social safety net for small entrepreneurs and the lack of a defaults rehabilitation program are risks that could drive some South Koreans desperate, and banks often ignore a five-year limit on destroying business records. ‘insolvency.

“Due to traditional banking industry practices, business owners in South Korea face a high probability of easing the debt burden of the business they run,” bankruptcy judge said Ahn Byung-wook.

Banks often require business owners to jointly guarantee the company’s loans, a practice the government banned public financial institutions from in 2018, though three owners told Reuters some suppliers persist.

Applicants for commercial loans who have bad credit or a history of defaults need collateral from state-run financial institutions in South Korea.

“Culturally, failed entrepreneurs are socially stigmatized, so it’s hard to start over because people don’t trust them,” added Ahn, who spent four years in Seoul Bankruptcy Court.

“On top of that, those who file for personal bankruptcy face a long list of employment restrictions.”

The number of self-employed workers in South Korea is among the highest in the world, accounting for a quarter of the labor market, making it vulnerable to downturns. A central bank study in 2017 showed that only 38% of these companies survive three years.

Yet as the economic outlook grows dim, with South Koreans seeking fewer good jobs amid soaring house prices, many are betting that speculation is the only route to wealth and have taken on more debt than ever before. buy stocks and other assets.

Household borrowing was roughly equal to GDP at a record 1,806 trillion won ($ 1.54 trillion) in the June quarter.

“The government encourages startups but they don’t deal with failed businesses,” said Ryu Kwang-han, a 40-year-old entrepreneur who left the debtor pardon program in 2019 but still struggles to secure funding. ready.

“How is it different from the ‘Squid Game’ if there isn’t a second chance?” “

The global sensation has been watched by 142 million households since its debut on September 17, the world’s largest streaming service said, helping Netflix add 4.38 million subscribers.

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