[1] Whether a debtor's submission of a false application document or a false statement constitutes grounds for denial of immunity under Article 564 (1) 3 of the Debtor Rehabilitation and Bankruptcy Act (negative)

[2] Whether a debtor's act of making payment to some creditors in accordance with the contents of obligations constitutes "an unfavorable disposal to a creditor" under Article 564 (1) 1 and Article 650 subparagraph 1 of the Debtor Rehabilitation and Bankruptcy Act, which is stipulated as the grounds for refusing to grant immunity (negative)

[3] In a case where a debtor's act of repayment aimed at giving a certain special benefit to a creditor upon knowing the bankruptcy, constitutes "a repayment in accordance with the contents of the repayment," whether the debtor's act of repayment constitutes grounds for denial of immunity under Articles 564 (1) 1 and 651 subparagraph 2 of the Debtor Rehabilitation and Bankruptcy Act (negative)

[1] Article 564(1)3 of the Debtor Rehabilitation and Bankruptcy Act provides that "When an obligor submits a false list of creditors or any other application documents, or makes a false statement with respect to the status of the property before the court," the above provision applies only to cases where the obligor submits a false application document or makes a false statement with respect to the status of the property," and it does not apply to cases where the obligor submits a false application document or makes a false statement with respect to the status of the property.

[2] Articles 564(1)1 and 650 Subparag. 1 of the Debtor Rehabilitation and Bankruptcy Act provide that "when it is acknowledged that there is a concealment or damage to property belonging to the bankruptcy estate, or an unfavorable disposal to the creditor," the grounds for refusing to grant immunity. Here, "an unfavorable disposal act against the creditor" refers to an absolute disposal act to all creditors, such as donation of property or sale at the remarkably unfair price, such as sale of property. Thus, the obligor's act of repaying certain creditors in accordance with the contents of obligations cannot be deemed to constitute "an unfavorable disposal act against the creditor."

[3] Articles 564(1)1 and 651 subparag. 2 of the Debtor Rehabilitation and Bankruptcy Act provide that “When an act concerning the provision of a security or the extinguishment of an obligation, with the intention of giving any special benefit to a creditor, knowing the existence of a cause for bankruptcy, does not belong to the debtor’s obligation or the method or time when it is deemed that there is an act not belonging to the debtor’s obligation,” the grounds for refusing to grant immunity. Thus, even if a debtor performs an obligation among many creditors with the knowledge of the existence of a cause for bankruptcy for the purpose of giving special benefit to any creditor among many creditors, even if the debtor performs the obligation with the intent of giving rise to bankruptcy, it cannot be deemed that

[1] Article 564 (1) 3 of the Debtor Rehabilitation and Bankruptcy Act / [2] Articles 564 (1) 1 and 650 subparagraph 1 of the Debtor Rehabilitation and Bankruptcy Act / [3] Articles 564 (1) 1 and 651 subparagraph 2 of the Debtor Rehabilitation and Bankruptcy Act

Re-appellant

Daegu District Court Order 2008Ra275 dated October 14, 2008

The order of the court below is reversed, and the case is remanded to Daegu District Court Panel Division.

The grounds of reappeal are examined.

1. Grounds for refusing to grant immunity under Article 564 (1) 3 of the Debtor Rehabilitation and Bankruptcy Act;

Article 564(1)3 of the Debtor Rehabilitation and Bankruptcy Act (hereinafter “Act”) provides that “When an obligor submits a false list of creditors or any other application documents, or makes a false statement with respect to the status of the property before the court,” the aforementioned provision applies only to cases where the obligor submits a false application document or makes a false statement with respect to the status of the property,” and it shall not apply to cases where the obligor submits a false application document or makes a false statement.

The court below held that the Re-Appellant's act constitutes grounds for refusing to grant the above exemption on the ground that the Re-Appellant's act stated in the application for bankruptcy and exemption stating that the Re-Appellant's cancellation of the insurance contract on November 2006 and repayment of KRW 30,000,000 to the non-Appellant among creditors was made to the non-appellant.

However, according to the records, while applying for bankruptcy and exemption in this case, the re-appellant omitted the above repayment in the “statement” submitted as accompanying documents along with the application form, but also stated the above repayment in the “property list” submitted as accompanying documents (Records 30 pages), and attached documents related to insurance termination issued by each insurance company (Records 58-67 pages).

In light of the aforementioned legal principles and the records, the Re-Appellant cannot be deemed to have made a false statement about the property status of the “deficial” at the time of the application for bankruptcy and exemption of the case, and therefore, the omission of the statement in the “deficial” cannot be deemed to constitute grounds for non-permission of exemption, and the lower court’

2. Reasons for refusing to grant immunity under Articles 564 (1) 1 and 650 subparagraph 1 of the Act;

Article 564(1)1 and Article 650 Subparag. 1 of the Act provide that "when it is deemed that there is a concealment or damage of property belonging to a bankrupt estate or an unfavorable disposition against any creditor," the grounds for refusing immunity. Here, "an unfavorable disposition against a creditor" refers to an absolute act of disposal to all creditors, such as donation of property or sale at substantially unfair prices, which is disadvantageous to all creditors. Thus, since a debtor's act of repayment to some creditors in accordance with the contents of obligations does not constitute "an unfavorable act of disposal to the creditor", it cannot be deemed that the act

As seen earlier, the lower court determined that the act of the re-appellant’s repayment to a person other than multiple obligees constitutes grounds for denial of the above exemption. However, in light of the above legal principles and records, the act of the re-appellant’s repayment to the person other than the appellant who actually bears the obligation cannot be deemed an unfavorable act to all creditors. Therefore, the lower court’s determination is unlawful.

3. Reasons for refusing to grant immunity under Articles 564 (1) 1 and 651 subparagraph 2 of the Act;

Article 564(1)1 and Article 651 Subparag. 2 of the Act provide that “When any creditor is an act concerning the provision of a security or the extinguishment of an obligation with the intention to give special profits, knowing the existence of a cause for bankruptcy, and which does not belong to the debtor’s obligation or the method or time is deemed to exist, which does not belong to the debtor’s obligation.” Thus, even if a debtor performs an obligation among multiple creditors with the knowledge of the existence of a cause for bankruptcy for the purpose of giving special profits to any of the creditors, even if the debtor performs the obligation with the intent to give special profits, the foregoing refusal of the discharge cannot be deemed grounds for non-permission

The court below held that the act of the re-appellant's repayment to multiple creditors other than the appellant constitutes grounds for non-permission of discharge as seen earlier, but in light of the above legal principles and records, the act of the re-appellant's repayment to the non-appellant pursuant to its contents cannot be deemed as grounds for non-permission of discharge. Thus, the court below's decision is unlawful.

4. Conclusion

Therefore, the order of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Yang Chang-soo (Presiding Justice)