South Korea’s “New Start Fund,” established by the administration of President Yoon Suk Yeol to alleviate household debt, has yet to commence its core function of debt forgiveness, despite having already amassed capital, according to a report published Tuesday by the Kukmin Ilbo newspaper.
The fund, intended as a “bad bank” to purchase and restructure distressed debt, has secured funding prior to establishing the necessary legal framework for debt reduction, the report states. The delay stems from legal constraints within the current system regarding the process of adjusting individual debts, requiring a specific review process that is not yet fully operational.
The Kukmin Ilbo reported that the fund has already raised 5 trillion won (approximately $3.6 billion USD) from the Korea Asset Management Corporation (KAMCO) and the National Happiness Fund, but is facing hurdles in implementing its debt relief program. The initial plan involved purchasing debt at discounted rates and offering restructuring options to borrowers.
According to a report from Yonhap News Agency published November 27, 2025, the New Start Fund completed a second purchase of long-term debt totaling 800 billion won (approximately $580 million USD). This second purchase included debt held by banks, life insurance companies, and lending companies, specifically targeting loans in arrears for more than seven years and under 50 million won (approximately $36,000 USD) per individual, including individual business owners. The total number of debtors affected by the second purchase is approximately 76,000.
The initial launch of the New Start Fund in October 2025 involved the purchase of 5.4 trillion won (approximately $3.9 billion USD) in overdue debt from KAMCO and the National Happiness Fund, impacting roughly 340,000 individuals, as reported by the Maeil Business Newspaper on October 30, 2025. The fund immediately halted collection efforts on the purchased debt, with plans to write off the debts of vulnerable populations, such as those receiving basic livelihood benefits, without further review. Other debts will undergo a thorough assessment of repayment capacity, with debts deemed unpayable being written off within one year, mirroring bankruptcy proceedings. Those with limited repayment capacity will be offered debt restructuring options.
Debtors can check whether their debt has been purchased by the New Start Fund and review the results of their repayment capacity assessment starting in January 2026 through the fund’s website. The New Start Fund is scheduled to purchase additional long-term overdue debt from credit finance companies, insurance companies, savings banks, and lending companies next month, and will continue to regularly acquire long-term overdue debt from financial institutions and public organizations, according to Yonhap News Agency.
The Newscj news outlet reported on November 1, 2025, that the New Start Fund’s first debt purchase included 370 billion won (approximately $2.7 billion USD) from KAMCO, affecting 229,000 individuals, and 1.7 trillion won (approximately $1.2 billion USD) from the National Happiness Fund, impacting 111,000 individuals.
