ENGLISH
Loan Agreement
Compulsory Enforcement
Purpose of Compulsory Enforcement- A "compulsory enforcement" is a compulsory measure or a procedure taken by the government by way of exercising its authority to satisfy any lawful claim.
·A compulsory enforcement procedure can be described as a follow-up procedure, which actually and finally resolves the dispute, whereas a judgment procedure can be described as a procedure that conceptually resolves the dispute by way of ascertaining any right of the party.
Granting Enforcement Order Purpose of Right of Enforcement- A "right of enforcement" means a right that is required to commence a compulsory enforcement procedure. The public authority may grant such right in the form of a written order stipulating any existence and scope of such right of enforcement and granting authority to exercise such right thereon.
·In relation to a claim for repayment of loan, types of rights of enforcement are as follows (Articles 24, 56, and 291 of the Civil Execution Act):
√ A final and conclusive judgment as to a claim for repayment of loan
√ A final and conclusive judgment as to provisional enforcement order issued in favor of a claim for repayment of loan
√ A fixed payment order
√ A document certified by a notary public, which contains the debtor's consent as to the compulsory enforcement of a claim, which is in relation to a fixed amount of money, its substitute, or other negotiable security
√ Binding agreements that have the same legal force as a final and conclusive judgment such as a settlement agreement by court mediation or a letter of acceptance of claim
√ A provisional attachment order
Issuing Enforcement Document- A compulsory enforcement can be done only with an original judgment (hereinafter referred to as an original "Enforcement Document"). (Article 28(1) of the Civil Execution Act)
· An Enforcement Document shall, upon an application, be issued by a court officer such as a junior administrative officer of the trial court. However, if the litigation record is kept in an appellate court, the court officer such as the junior administrative officer of the appellate court shall issue such Enforcement Document. (Article 28(2) of the Civil Execution Act)
※You may find the application forms for issuing an Enforcement Document at: <Online application center of Court of Korea-How to use-Templates>.
Exceptions for Issuing Enforcement Document- Although issuing an Enforcement Document is required in principle for all rights of enforcement to be exercised, such document is not required if there is a fixed payment order, a final and conclusive judgment in the form of a recommendation by the court mediation, or a provisional attachment order. (Articles 58(1) and 292 of the Civil Execution Act; Article 5-8(1) of the Trial of Small Claims Act)
Procedure for Disclosure of Property Purpose of Procedure for Disclosure of Property- A "procedure for disclosure of property" may be taken by a creditor where he or she intends to enforce the right of enforcement. Pursuant to this procedure, if the creditor cannot locate any property of the debtor, the court may order the debtor to submit a sworn statement including his or her property list and ask public institutions or financial institutions about information regarding such properties to verify the list. If the debtor does not appear on the date for submission, or does not submit the list, he or shall be registered on the List of Debtors in Default.
· A procedure for disclosure of property mainly consists of the following three parts: disclosure of debtor’s property, verification of property, and registration on the List of Debtors in Default.
Declaration for Disclosure of Debtor’s Property- A creditor who is entitled to commence compulsory enforcement based upon the right of enforcement aiming at payment of money, may lodge an application for a disclosure of debtor’s property before the court in the location of the debtor’s general forum. (Article 61(1) of the Civil Execution Act)
· An application shall be in writing and contain the followings: names of the creditor, the debtor and their legal representatives (if any); amount of the debt in default; purpose of application; and grounds for application. (Article 25(1) of the Regulations of Civil Execution)
※ You may find the application forms for disclosure of property at: <Online application center of Court of Korea-How to use-Templates>.
Application for Registering on List of Debtors in Default- In the case where after a creditor is entitled to a right of enforcement, if a debtor fails to make repayment within six (6) months from such entitlement, or if the debtor refuses to appear before the court without any reasonable excuse or refuses to take an oath, or if the debtor fails to submit his or her property list or behaves in an uncooperative manner, the creditor may apply for registering the debtor’s name on the List of Debtors in Default. (Article 70(1) of the Civil Execution Act)
※You may find the application forms for registering on List of Debtors in Default at: <Online application center of Court of Korea-How to use-Templates>.
Verification of Property- The court having jurisdiction over the procedure for disclosure of property may, upon application by the creditor, ask public institutions, financial institutions or other organizations, which control the computer networks on the property and credit of the individuals, about information regarding such properties to verify the list of properties in one of the following circumstances (Article 74 of the Civil Execution Act):
· Where a disclosure order is unable to be served to the debtor by reason of unknown address even after the creditor has received an order from the court to rectify the debtor's address
· Where the properties on the list, which was provided by the debtor in accordance with the procedure for disclosure of property, fall short of the satisfaction of the enforcement
· Where the debtor refuses to appear before the court without any reasonable excuse or to take an oath, or where the debtor fails to submit his or her property list (e.g. submission of falsified property list).
※ You may find the application form for disclosure of property at: <Online application center of Court of Korea-How to use-Templates>.
Seizure of Debtor’s Property & Judicial Sale Types of Compulsory Enforcement- A compulsory enforcement may be classified according to the subject matter of such enforcement as follows: an enforcement against an immovable (Articles 78 to 171 of the Civil Execution Act); an enforcement against a quasi-immovable such as a ship (Articles 172 to 186 of the Civil Execution Act); an enforcement against an automobile, a construction machinery, or an aircraft (Article 187 of the Civil Execution Act); and an enforcement against a movable which is tangible or receivable. (Articles 188 to 274 of the Civil Execution Act)
Enforcement against Immovables- The court having jurisdiction may, upon application by the creditor, take into effect the procedure for compulsory enforcement against an immovable. (Articles 78(1) and 79 of the Civil Execution Act)
- A compulsory enforcement against an immovable shall be effected by means of a compulsory auction or a compulsory administration. (Article 78(2) of the Civil Execution Act)
· A "compulsory auction" is a judicial sale by taking effect the procedure for compulsory enforcement. The process for a compulsory auction shall be as follows: ①Initiating a compulsory auction (Article 83 of the Civil Execution Act), ②Preparing a judicial sale (Article 84 of the Civil Execution Act), ③Giving a public notice regarding date of sale and date of decision (Article 104 of the Civil Execution Act), ④Taking procedure for judicial sale (Article 72 of the Regulations of the Civil Execution), ⑤Receiving sale proceeds (Article 142 of the Civil Execution Act), and ⑥Distribution (Article 145 of the Civil Execution Act)
· By a "compulsory administration", the court shall prohibit the debtor from interfering in administrative affairs and also from disposing of any profits from the immovable and shall order that the profits be paid to the creditor for the satisfaction of debt. The process for a compulsory administration shall be as follows: ①Ruling on commencing compulsory administration (Article 164 of the Civil Execution Act); and ②Distribution (Article 169 of the Civil Execution Act).
· An application for a compulsory enforcement or for a compulsory administration shall be made in writing, and the creditor shall fill out the application form with the details of the creditor and the debtor, the subject property, amount of debt, and any grounds for the application including a right of enforcement. (Article 81 of the Civil Execution Act)
※ You may find the application forms for a compulsory auction of an immovable at: <Online application center of Court of Korea-How to use-Templates>.
Compulsory Enforcement against Quasi-Immovables- Apart from immovables, any one of the following movable properties, which can be registered, shall be the subject matter for a compulsory enforcement as quasi-immovables: a ship (Articles 172 to 186 of the Civil Execution Act); an aircraft, an automobile or construction machinery. (Article 187 of the Civil Execution Act)
Compulsory Enforcement against a Movable Which Is Tangible or Receivable- A compulsory enforcement is also available against a movable that is tangible or against the debtor’s receivable from a third person. (Articles 188 to 274 of the Civil Execution Act)
· The process for a compulsory enforcement against a movable that is tangible shall be as follows: ①Seizure (Article 189 of the Civil Execution Act); ②A tender or an auction sale (Article 199 of the Civil Execution Act); and ③Distribution (Article 155 of the Regulations of Civil Execution).
· The process for a compulsory enforcement against the debtor’s receivable shall be as follows: ①Seizure (Article 223 of the Civil Execution Act); and ②A collection order or an assignment order (Article 229 of the Civil Execution Act).
※ You may find the application forms for a seizure or an assignment order at: <Online application center of Court of Korea-How to use-Templates>.
Satisfaction of Creditor Enforcement against Immovables or against Quasi-Immovables- The following creditors shall be entitled to receive a distribution at the same time: (i) Execution creditors who have declared a bid not later than the completion period for demanding a distribution; (ii) Creditors who have demanded a distribution not later than the completion period for demanding a distribution; and (iii) Provisional attachment obligees who have been registered prior to the registration of a decision on commencing the first auction. (Article 148 of the Civil Execution Act; Article 185 of the Regulations of the Civil Execution)
- When the sale proceeds from a compulsory enforcement against an immovable are insufficient to satisfy all creditors taking part in the distribution, the court shall make a distribution in the priority under the Civil Act, the Commercial Act, and any other relevant Acts. This shall apply mutatis mutandis to a compulsory enforcement against a quasi-immovable. (Articles 145(2) and 172 of the Civil Execution Act)
· Except for the costs for enforcement, which is in the highest priority (Article 53(1) of the Civil Execution Act), the next priority for distribution shall be as follows:
1. A claim for up to three months’ pay for each employee that was unpaid; or a claim for a retirement allowance/accident compensation allowance for the last three years; and a claim for refund of small amount of deposit in relation to a residential property or to a commercial building;
2. Taxes and public dues charged to the property;
3. General taxes, which take precedence over any secured right;
4. A mortgage claim, a claim secured by a provisional registration, Chonsegwon(right of registered lease on deposit basis), or a registered leasehold, a claim for leasehold deposit having a certification of a fixed date for the deposit in relation to a residential property or a commercial building, all of which were established after taxes that were due under the law;
5. Pay, retirement allowance, accident compensation allowance, or any other claim in relation to labor relationship;
6. Any taxes that are due after a mortgage, or Chonsegwon(right of registered lease on deposit basis) that has been established;
7. Any claim for a medical insurance, a pension insurance, an employment insurance, or an industrial accident compensation insurance; and
8. General claims
※As a claim right for repayment of a loan constitutes a general claim, its priority shall be number 8.
※If an immovable is under a compulsory administration, the costs for administration of immovables shall be reimbursed from the profits and any taxes and other public imposts to be imposed on the immovables shall be deducted before paying the creditors any balance of the profits. (Article 169(1) of the Civil Execution Act)
Compulsory Enforcement against a Movable Which Is Tangible- The creditor may apply in writing for an enforcement against a movable which is tangible (Article 4 of the Civil Execution Act), and such procedure shall be effected by an enforcement officer who seizes such movable. (Article 189(1) of the Civil Execution Act)
- The enforcement officer shall sell the seized movable at a reasonable price. (Article 199 of the Civil Execution Act)
- A creditor who applied for the enforcement shall be repaid by receiving the sale proceeds. (Articles 217 to 221 of the Civil Execution Act)
Compulsory Enforcement against a Receivable- A compulsory enforcement against a receivable arises where the debtor has a receivable from a third person. In this circumstance, the creditor may apply for a compulsory enforcement against the receivable. (For example, if B owes a debt in the sum of KRW 100 million to A whereas B has a receivable in the sum of KRW 50 million from C, A may apply for a compulsory enforcement against such receivable.)
- When applying for an enforcement based on a monetary claim, the creditor shall make an application in writing (Article 4 of the Civil Execution Act), and not only the creditor, the debtor, the third person debtor, and right of enforcement (Article 159 of the Regulations of the Civil Execution), but also types and amount of money involved in the seizure shall be expressly stipulated in the application form. (Article 225 of the Civil Execution Act)
- A judicial sale and payment of the sale proceeds shall be done by a collection order and an assignment order.
※If the court authorizes the creditor to collect the debt, the creditor shall be repaid by collecting the seized property from the third person debtor. In this circumstance, the creditor is obliged to report to the court of his or her receipt once such repayment has been made. (Article 236(1) of the Civil Execution Act)
※Where an assignment order has become final and conclusive, it shall be deemed that the debtor has reimbursed his or her debts when the assignment order was served to the third person debtor. (Article 231 of the Civil Execution Act)
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