Personal Rehabilitation, Workout and the Fresh Start Fund: Differences and How to Choose

Is personal rehabilitation (gaein hoesaeng) the only way to reduce debt? In debt consultations we are often asked whether rehabilitation is necessary, but there are other debt adjustment systems, such as the workout offered by the Credit Counseling and Recovery Service and the Fresh Start Fund (Saechulbal Fund) operated by the Financial Services Commission. We have placed the three systems side by side, item by item, and summarized which choice suits which situation.

Personal rehabilitation is not always the right fit

Personal rehabilitation is a powerful debt adjustment system through the court, but it is not always the best choice.

When debt is relatively small

If your debt is KRW 20 million or less, proceeding with court rehabilitation while bearing attorney fees and the burden of the procedure may not make economic sense. In such cases, a workout or a pre-workout becomes a more realistic choice.

When the asset or income structure is unclear

Because personal rehabilitation is a court procedure, all income and assets must be disclosed transparently. If you have assets that are hard to disclose, irregular income, or secured loans that are complicated and intertwined, the court procedure may be burdensome. In such cases, you can look first at the Credit Counseling and Recovery Service's programs.

The three systems at a glance

Scope of adjustment

The greatest strength of personal rehabilitation is that it does not discriminate among creditors. You can settle not only debts to financial institutions but also private loans and taxes all at once.

Delinquency requirement

If you need to change your debt structure urgently, personal rehabilitation, which has no delinquency requirement, may be advantageous. The workout and the Fresh Start Fund can be applied for only after delinquency of a certain period or longer.

Repayment period

If you want to repay in installments over a long period, the workout family of programs is advantageous. The Fresh Start Fund allows repayment in installments for up to 20 years.

Speed of credit recovery

Formally, the system that clears credit information fastest is the Fresh Start Fund. If you repay faithfully for one year, the adjustment information can be deleted.

Creditor consent and cost

The weakness of the workout and the Fresh Start Fund is that adjustment may be limited if creditors do not consent. In exchange, the cost burden is low and the procedure is simple. Personal rehabilitation does not require creditor consent because the court decides, but it involves attorney fees and a complex procedure.

So which choice is right?

From the debtor's point of view alone, personal rehabilitation, with its wide scope of adjustment, binding force and the possibility of discharge, is the most powerful system. Even so, if the following apply to you, a workout or the Fresh Start Fund may be a better choice.

• Your debt is relatively small.
• You have only debts to financial institutions.
• The court procedure is burdensome for you.
• You need to repay in installments over a long period.

Can I move from a workout to personal rehabilitation?

Yes, you can. If you started adjustment through a workout or the Fresh Start Fund and simply cannot keep up, switching to personal rehabilitation partway through is also an option. You are not bound to the system you first chose until the end.

With debt adjustment systems, no single option is unconditionally better. The right choice depends on the size of the debt, the composition of creditors, the income structure and the asset situation. Rather than thinking of personal rehabilitation first, it is important to compare the three systems side by side and choose based on the criteria most favorable to you.

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Last reviewed: 2026-10-19 This article provides general legal information; specific advice is given through consultation.