[1] The meaning of "when an application for individual rehabilitation procedure is not in conformity with the general interest of creditors" under Article 595 subparagraph 6 of the Debtor Rehabilitation and Bankruptcy Act, and the requirements to dismiss the application for commencement of individual rehabilitation procedure by the debtor on the ground that it constitutes "when the application is not bona fide" under subparagraph 7 of the same Article

[2] Whether the repayment period among matters concerning the repayment of individual rehabilitation claims with general preferential rights that must be determined in the repayment plan pursuant to Article 611(1)2 of the Debtor Rehabilitation and Bankruptcy Act is appropriate for the overall interest of all creditors that should be within 1/2 of the total repayment period (negative)

[1] Article 595 subparag. 6 and 7 of the Debtor Rehabilitation and Bankruptcy Act / [2] Article 611(1)2 of the Debtor Rehabilitation and Bankruptcy Act

[1] Supreme Court Order 2011Ma201 Decided June 10, 201 (Gong2011Ha, 1389) Supreme Court Order 201Ma101 Decided March 15, 2013

The debtor

Subu District Court Order 2016Ra362 dated August 31, 2016

The order of the court below shall be reversed, and the case shall be remanded to the Gu Government District Court.

The grounds of reappeal are examined.

1. Article 595 Subparag. 6 of the Debtor Rehabilitation and Bankruptcy Act (hereinafter “the Act”) provides that “when an application for individual rehabilitation procedures is not in conformity with the general interest of creditors” refers to cases where the present value of the debt repaid by individual rehabilitation procedures falls short of the liquidation value of the debtor’s property, and it is not appropriate for the general interest of all creditors to dismiss the application for individual rehabilitation procedures of the debtor on the ground that it constitutes “when the application is not bona fide,” as provided in Article 595 Subparag. 7 of the Act, it constitutes “when the application is not bona fide.” In addition, it should be acknowledged that the debtor committed procedural errors corresponding to subparagraphs 1 through 5 of the same Article, or that the debtor applied for the commencement of individual rehabilitation procedures for unjust purposes, such as where the current value of the debt repaid by individual rehabilitation procedures falls short of the liquidation value of the debtor’s property (see, e.g., Supreme Court Order 2013Ma101, Mar. 15, 2013).

2. On January 25, 2016, taking into account the creditors’ equity, the lower court recommended a debtor to submit a draft repayment plan with a repayment period of less than 29 times in consideration of the creditors’ equity, but the debtor did not comply with it. On July 28, 2016, the lower court ordered the debtor to revise the same content as the first instance court, and without considering the method of increasing the available income, the debtor submitted a draft repayment plan with a general preferential right equivalent to 44% of the total individual rehabilitation claims, 40 times out of the total repayment period, without considering the method of increasing the available income, etc., the lower court upheld the first instance court’s decision dismissing the application of the debtor’s individual rehabilitation procedure as it is on the ground that the debtor delays the procedure due to the failure to comply with the correction without reasonable grounds, which constitutes “when the debtor’s application is not bona fide or delays the procedure without good faith,” as stipulated in Article 595 subparag. 7 of the Act and Article 595 subparag. 6 of the Act. 595.

3. However, it is difficult to accept the above determination by the court below for the following reasons.

A. Article 611(1)2 of the Act provides that the debtor shall determine matters concerning the repayment of the total amount of individual rehabilitation claims with general preferential rights in the draft repayment plan. The period for repayment of individual rehabilitation claims with general preferential rights may vary according to the ratio of individual rehabilitation claims with general preferential rights to the total amount of individual rehabilitation claims, and even if individual rehabilitation claims with general preferential rights are repaid in installments for not less than 30 months, they are in accordance with the order of priority prescribed by the Act. Thus, even if the repayment period of individual rehabilitation claims with general preferential rights is within 1/2 of the total repayment period, there is no ground to deem that the repayment period of individual rehabilitation claims with general preferential rights is fit for the general interest of the

B. In this case, the debtor asserts that only 75,082 won should be used for the living expenses of three family members when the repayment period for individual rehabilitation claims with general preferential right is set at 29 months. However, aside from the case where the debtor's actual available income is more than that stated in the repayment plan and according to the actual available income, it is confirmed that the repayment period for individual rehabilitation claims with general preferential right may be reduced to 29 months, it would result in demanding the debtor to submit a draft repayment plan with general preferential right to 29 months under the circumstances where it is not confirmed that the court is allowed to submit a draft repayment plan with general preferential right to 29 months. Thus, even if the debtor did not submit a draft repayment plan with general preferential right, it cannot be deemed that the debtor failed to comply with the order of the court without reasonable grounds.

C. Unlike cases where the current value of the debt repaid falls short of the liquidation value of the debtor's property, the bankruptcy proceedings are more favorable to the creditors, and even if the repayment period of individual rehabilitation claims with general priority becomes more than 1/2 of the total repayment period of 60 months, it can always be readily concluded that the individual rehabilitation procedures are more unfavorable to the creditors than those of the bankruptcy proceedings. In this case, according to the repayment plan submitted by the debtor, it is difficult to conclude that the individual rehabilitation procedures are more unfavorable to the creditors than those of the bankruptcy proceedings.

D. Examining these circumstances in light of the legal principles as seen earlier, the lower court should order the obligor to revise the foregoing, and examine whether the repayment period of a claim with general priority can be reduced more than that of the draft repayment plan submitted by the obligor on the basis of the obligor’s available income confirmed on the record, and further, in light of the repayment plan at the time when the obligor set the maturity period for a claim with general priority in the short and short term, it should be examined whether the individual rehabilitation procedure would be in accordance with the overall creditors’ interests. Nevertheless, without examining these circumstances, the lower court maintained the first instance judgment, which rejected the application for commencement of the individual rehabilitation procedure on the ground that the obligor did not reduce the repayment period of a claim with general priority by 29 months on the ground that the obligor did not reduce the repayment period of a claim with general priority by 29 months despite the court’s order of correction. In so doing, the lower court erred by misapprehending the legal doctrine on the grounds for dismissing the application for commencement of the individual rehabilitation procedure under Articles 595 subparag. 6 and 7 of the Act, and failing to exhaust all

4. 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 Lee Ki-taik (Presiding Justice)