Lawsuit for Return of a Loan

The creditor first demands repayment from the debtor through a certified notice of contents.

A certified notice of contents is a system by which the post office certifies the date of delivery and the contents of the document, and it serves as important evidence in any subsequent lawsuit.

If there is a concern that the debtor may conceal property or allow another creditor to receive a preferential distribution, the creditor should file for provisional attachment to prevent the disposal of the property.

Provisional attachment also has the effect of interrupting the extinctive prescription.

If the debtor acknowledges the obligation, the creditor may file for a payment order, which is a demand procedure, and if there is no objection, a title for execution can be secured quickly.

However, if the debtor denies the obligation or files an objection, the matter must proceed to a civil lawsuit.

In the case of a lawsuit, if the amount in dispute is 30 million won or less, it proceeds as a small claims case, which simplifies the procedure.

When there is a favorable judgment, a confirmed payment order, a decision on provisional attachment, or the like, compulsory execution becomes possible through the title for execution.

Money can be recovered through attachment and auction against real estate, deposits, wages, and other assets.

What the creditor must prove in the lawsuit is the fact that a legitimate act of lending took place and that a corresponding obligation to repay exists.

However, if there is no loan certificate or notarized deed, a mere record of an account transfer may be regarded as a simple remittance, which can place the creditor at a disadvantage.

In such cases, the evidence should be supplemented with text messages, social media conversations, recorded calls, and emails, and depending on the circumstances, work to reinforce circumstantial evidence through digital forensics and similar methods may also be necessary.

The extinctive prescription for civil monetary claims is 10 years, while for commercial claims arising from commercial acts it is, as a general rule, 5 years.

However, if no measures are taken during this period, the claim may be extinguished.

To prevent this, a strategy to interrupt the prescription through sending a certified notice of contents, filing for a payment order, filing a lawsuit, or filing for provisional attachment is necessary.

In particular, once a claim is confirmed by a judgment or the like, the prescription is extended again to 10 years, so taking active measures before the prescription is completed is very important.

If the debtor refuses to return the loan, the court grants a title for execution through a judgment.

Based on this title, compulsory execution can be carried out through attachment and auction against the debtor's property, including real estate, wages, deposits, vehicles, and claims.

However, a problem can arise even at this stage.

This is because, if the debtor's property has already been concealed or the debtor has no actual ability to pay, the judgment alone does not result in actual repayment.

Therefore, before and after the lawsuit, a preemptive response through investigation of the debtor's property and preservative measures such as provisional attachment or provisional injunction is necessary.

-Possibility of losing the case when supporting evidence is insufficient

If there is only a record of an account transfer, the other party may be at an advantage by arguing that ‘this is not money to be repaid’

-Unclear repayment date

If the time of the loan cannot be specified, the case may be lost due to the issue of the starting point of the extinctive prescription

-Caution regarding the lapse of prescription

If appropriate legal measures are not taken within the 10-year period, the right may be extinguished

-Risk of inability to execute

Even if a judgment is obtained, there is no practical benefit if the debtor is insolvent

-Whether a criminal complaint for fraud is possible

The mere failure to repay money does not necessarily result in criminal punishment (crime of fraud).

It must be proven that there was no intention to repay from the time the money was borrowed, and the crime of fraud may be recognized only when the purpose of the loan and the repayment plan were falsely stated.

-Validity of setting a liquidated damages amount

If delay damages or a penalty are specified in the loan certificate, a claim can be made even without proving the loss, but an excessively high liquidated damages amount may be reduced.

-The issue of applicable interest rates

An interest rate of 5% per year applies to civil obligations and 6% per year to commercial obligations, and after the pronouncement of judgment, delay damages of 12% per year apply. However, where there is an agreed interest rate, that rate governs.

Application for disclosure or inquiry into property: where it is necessary to identify the debtor's property for execution, an order to submit a list of property or a request for inquiry to financial institutions can be made through the court.

Q. I lent money interest-free, and it was repaid after the due date had passed. Can I receive interest?

A. Yes, you can.

If you agreed to lend money to a friend interest-free for just one month and wrote a loan certificate, no interest applies during the originally agreed one-month period.

However, if the money was not repaid even after the agreed due date had passed, you can receive ‘delay interest’ for that period.

Q. If one year passes for an unpaid restaurant tab, can it no longer be collected?

A. Yes, unfortunately, after one year it becomes difficult to collect.

A short-term extinctive prescription of one year applies to charges for food, lodging fees, fees for entertainment facilities, and the like.

That is, if the right to receive the money is not exercised for one year, it automatically disappears.

An unpaid tab is also subject to the short-term extinctive prescription

However, you might have been able to collect it if you had used the following methods in advance.

Q. I repaid part of money I borrowed from a friend 12 years ago. Now that I think about it, since the extinctive prescription has passed, do I not have to repay it?

A. However, if you repaid even a part of the money after the extinctive prescription had passed, this is regarded as acknowledging the obligation and waiving the benefit of prescription.

That is, a legal obligation to repay the remaining money arises.

Therefore, you must repay the remaining amount to your friend as well, and you should be careful that conduct or statements made after the prescription has passed can have the effect of acknowledging the debt.

A lawsuit for the return of a loan is a procedure that goes beyond simply recovering borrowed money and involves a complex combination of various legal factors, including the burden of proof, the issue of prescription, and the possibility of compulsory execution.

When money was lent orally without a loan certificate, or when a dispute arises after a long period of time, a more careful approach is necessary.

In particular, strategic responses for identifying the debtor's property, taking preservative measures, and interrupting the prescription must be considered at the early stage, and depending on the situation, criminal procedures may also need to be reviewed together.

If the materials are sufficient and the debtor has no intention of disputing, an individual may respond directly, but if the evidence is insufficient or the other party raises an objection, receiving assistance from a legal professional from the outset can be a wise choice that reduces time and cost.

This firm has civil-law attorneys who, after identifying matters such as the extinctive prescription of the claim and the debtor's financial situation, establish a case response strategy suited to those circumstances.

In addition, when evidence is insufficient in the progress of a client's case, the firm collaborates with evidence-collection specialists to secure evidentiary materials, thereby providing a one-stop legal service.