- South Korean courts may exclude crypto losses from liquidation, lowering debt burdens in rehab cases.
- New courts in Daejeon, Daegu, and Gwangju will apply rules aimed at easing investor bankruptcy risks.
- Authorities add safeguards to prevent debtors from hiding crypto assets or misreporting losses.
South Korean courts are preparing to adjust how cryptocurrency investment losses are treated in personal rehabilitation proceedings as the country grapples with rising household debt. Under new judicial guidelines, certain crypto-related debts may be excluded from liquidation calculations, potentially lowering the repayment burden for individuals seeking debt restructuring.
The policy change is being introduced as part of broader efforts by authorities to address the country’s growing personal debt pressures while managing the increasing number of bankruptcy and rehabilitation filings linked to investment losses.
New Rehabilitation Courts Introduce Updated Guidelines
Three newly opened rehabilitation courts in Daejeon, Daegu, and Gwangju began operating this month and will apply the revised approach in relevant cases. According to reports, these courts will exclude debts arising from cryptocurrency or stock investments when determining the amount of assets to be liquidated during personal rehabilitation proceedings.
By removing those investment losses from liquidation calculations, the courts could reduce the total repayment obligations that debtors owe to creditors. The measure is intended to provide relief to individuals whose financial difficulties are tied to losses in financial markets.
These new courts will operate alongside South Korea’s existing rehabilitation court network. The first such court opened in Seoul in 2017 as part of a government initiative designed to restructure debts held by insolvent individuals and small businesses. Additional branches were established in Suwon and Busan in 2023 to handle rising case volumes.
Officials at the Suwon and Busan courts have already begun classifying certain cryptocurrency and stock investment losses as “general property” losses rather than “speculative debts.” According to the courts, that classification has allowed some debtors to ease repayment burdens during rehabilitation proceedings.
Rising Debt Pressures Shape Policy Changes
The new judicial approach emerges alongside continued concern over South Korea’s household debt levels. The country’s household debt-to-GDP ratio reached 92% in 2025, highlighting the scale of personal borrowing across the economy. In response, the government has pledged to limit household debt growth to 3.8%.
Public debate over debt relief measures intensified in December after authorities provided debt relief exceeding $15 million to 269 individual cryptocurrency traders. The support came from a fund originally intended to assist small businesses, drawing criticism from some observers.
Meanwhile, the Seoul Rehabilitation Court reported a rising workload tied to debt restructuring cases. The court handled approximately 28,000 cases last year, an increase of nearly 13% from 2023.
Courts Warn Against Misuse of Debt Relief
Judicial officials have indicated that the revised guidelines will include safeguards to prevent misuse. Courts said they will closely examine cases to ensure that individuals do not conceal cryptocurrency holdings or attempt to misrepresent their investment activities.
The Daegu Rehabilitation Court stated that any debtor found intentionally hiding crypto purchases by disguising them as failed investments could face penalties.
Related: South Korea Supreme Court Rules Crypto on Exchanges Can Be Seized
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