CONTENTS
- 1. Lawsuit of Objection to Distribution | Definition
- - Types of Lawsuit of Objection to Distribution
- 2. Lawsuit of Objection to Distribution | Requirements for Proceeding
- 3. Lawsuit of Objection to Distribution | Procedure
- 4. Lawsuit of Objection to Distribution | Methods of Response
- - Reviewing the Distribution Schedule and Whether to Object
- - Raising an Objection on the Date of Distribution
- - Filing the Lawsuit and Submitting the Certificate Within One Week
- - Tips for Drafting the Complaint
- - Application for Stay of Execution
- - Points to Note During the Course of the Lawsuit
- - Judgment and Subsequent Procedures
- 5. Lawsuit of Objection to Distribution | Issues
1. Lawsuit of Objection to Distribution | Definition
A lawsuit of objection to distribution is a civil litigation procedure in which an interested party raises an objection to the contents of the distribution schedule prepared in compulsory auction or public auction proceedings.
This objection lawsuit is filed mainly to resolve disputes among creditors over the ratio, priority, and amount of the distribution proceeds.
In a compulsory auction, distribution proceeds according to the legally recognized priority of security rights recorded in the register, attachments, provisional attachments, demands for distribution, and the like.
In the actual preparation of the distribution schedule, however, objections frequently arise from issues such as errors in priority, differing interpretations of whether a right is recognized, and the timing of a demand for distribution.
In such situations, a lawsuit of objection to distribution is the lawsuit by which a creditor asserts their rights and corrects an unfair distribution.
This lawsuit is not a mere objection application but a formal civil litigation procedure, and the distribution schedule may be modified or newly prepared in accordance with the court's final judgment
Types of Lawsuit of Objection to Distribution
Lawsuits of objection to distribution can be broadly divided into the following types.
1. Dispute over the Distribution Amount
This is filed when there is an objection regarding a particular creditor's claim amount or whether a right of preferential reimbursement is recognized.
For example, where a creditor's mortgage to secure a maximum amount has been canceled but is nonetheless included in the distribution schedule, another creditor may contest this through a lawsuit of objection to distribution.
2. Dispute over Priority
Where multiple security rights are established over the same collateral, the priority differs according to the date of registration and the nature of the right.
Where there is an error in this priority, a creditor may raise an objection in order to receive distribution again according to the order of priority.
3. Dispute over the Method of Preparing the Distribution Schedule
Where there is a procedural error in the way the execution court prepares the distribution schedule, for instance regarding the timing of a demand for distribution or the omission of a creditor, a lawsuit of objection to distribution may be filed.
2. Lawsuit of Objection to Distribution | Requirements for Proceeding
We will review the filing of a lawsuit of objection to distribution and the requirements for standing of the plaintiff and the defendant.
▶Requirements for Filing the Lawsuit of Objection to Distribution and Submitting the Certificate
A person who wishes to object to distribution must raise an objection to the distribution schedule on the date of distribution.
The lawsuit of objection to distribution must then be filed with the execution court within one week from the date of distribution.
Filing the lawsuit alone is not sufficient, and a 'certificate of filing of the lawsuit' must be submitted to the execution court within one week from the date of distribution.
If the certificate of filing is not submitted within the prescribed period, the objection is deemed withdrawn, and in that case the lawsuit of objection to distribution is unlawful and is rejected.
Only when all three of these steps are carried out can the lawsuit of objection to distribution be lawfully pursued.
▶Standing of the Plaintiff (Persons with Standing as a Party)
The persons who may file the lawsuit of objection to distribution as plaintiff are as follows.
① Creditor
Only a creditor who attended on the date of distribution and raised a substantive objection has standing as a plaintiff.
In the case of a creditor, however, standing as a plaintiff is recognized once an objection has been raised, even without an enforceable title of execution (for example, a final judgment).
A provisional attachment creditor is also included if these requirements are met.
By contrast, a creditor who was unable to make a demand for distribution has no authority to raise a substantive objection in the first place, so even if such a creditor attends on the date of distribution and raises an objection, it is deemed an unlawful objection and the creditor has no standing as a plaintiff.
② Debtor
A debtor who attended on the date of distribution and raised an objection naturally has standing as a plaintiff.
In addition, even if the debtor did not attend on the date of distribution, standing as a plaintiff is recognized where the debtor raised an objection in writing from the time the original distribution schedule was made available until before the close of the date of distribution.
▶Standing of the Defendant (Persons Who May Be a Defendant)
The person who may be named as defendant in the lawsuit of objection to distribution is the counterparty to the objection, namely a person whose distribution amount (or, in the case of the debtor, surplus) is reduced as a result of the objection.
That is, a creditor or debtor who does not accept the objection as valid becomes the defendant.
Generally, among the creditors receiving distribution under the distribution schedule, a person whose distribution amount is reduced as a result of the objection has standing as a defendant.
3. Lawsuit of Objection to Distribution | Procedure
A lawsuit of objection to distribution proceeds through the following procedure.
1. Submission and Receipt of the Complaint
The complaint must be submitted to the execution court within one week from the date of distribution, and it is common to file at the same time an application for a stay of execution, together with materials that can prove the filing of the lawsuit of objection to distribution (such as a certified copy of the register and a certificate of claim).
2. Conduct of the Lawsuit
A lawsuit of objection to distribution proceeds in accordance with the provisions of the Civil Execution Act, and the lawfulness of the distribution schedule is determined through written argument and examination of evidence.
① A debtor who attends on the date may object to a creditor's claim or the priority of that claim.
② Notwithstanding paragraph (1), a debtor may object in writing to a creditor's claim or the priority of that claim from the time the original distribution schedule is made available to the court under Article 149 (1) until the date of distribution ends.
③ A creditor who attends on the date may, within the scope of their own interest, object against another creditor as to that creditor's claim or the priority of that claim.
3. Judgment
In accordance with the Civil Execution Act, the court may render a judgment in the following ways.
-Declaring all or part of the distribution schedule void
-Ordering the preparation of a new distribution schedule
-Adjusting the distribution amount and fixing the distribution amount of a particular creditor
▶Points to Note Regarding the Scope of the Objection
-Where the non-existence of a claim is asserted: An objection may be freely raised against any creditor
▶Where the Objection Concerns the Priority of Distribution
-An objection cannot be raised against any creditor of higher priority than oneself
-Going back from creditors of lower priority than oneself, an objection may be raised only against the relevant creditors until one's own claim amount is reached
4. Lawsuit of Objection to Distribution | Methods of Response
Because a lawsuit of objection to distribution proceeds in accordance with ordinary civil litigation procedure, conducting the lawsuit on one's own requires an understanding of the Civil Execution Act, the Civil Procedure Act, and the like at a certain level or above.
In particular, where the filing period, the form of submitting the complaint, the preparation of evidence, and the like are deficient, the lawsuit itself may be rejected, so the legally required procedures must be carried out precisely.
Reviewing the Distribution Schedule and Whether to Object
You should check the contents of the distribution schedule immediately after attending on the date of distribution, or after the point when the original distribution schedule is made available at the court.
Where your claim amount, distribution priority, and distribution proceeds are not properly reflected, you should closely examine whether grounds for a substantive objection exist.
Raising an Objection on the Date of Distribution
On the day of distribution, you must attend the court in person and clearly state your objection to the distribution schedule, orally or in writing.
The objection must not stop at the level of 'the amount received is too small'; rather, it must specifically explain on what legal grounds the distribution was wrong.
If a party does not attend on the date of distribution, the debtor may raise an objection in writing, but a creditor cannot file the lawsuit afterward unless the creditor attends and raises an objection.
Filing the Lawsuit and Submitting the Certificate Within One Week
Within one week from the date of distribution, the complaint for the lawsuit of objection to distribution must be submitted to the execution court with jurisdiction.
At the same time, within one week, a 'certificate of filing of the lawsuit' that proves the lawsuit was filed must be submitted to the same execution court.
If this certificate is not submitted, the objection is deemed withdrawn, and the lawsuit itself is rejected.
Tips for Drafting the Complaint
When drafting the complaint yourself, you must be sure to include the following items.
Item | Contents |
Designation of the Parties | Plaintiff (the person raising the objection) and defendant (a creditor who benefited from the distribution, and the like) |
Purport of the Claim | "Part (or all) of the distribution amount to the defendant is void, and it is ordered that ○○ won be distributed preferentially to the plaintiff," and the like |
Cause of the Claim | Asserting that the defendant's right was not established or that one's own right has priority, and describing the relevant facts and legal relationships in detail |
List of Evidentiary Materials | Attaching supporting materials such as a certified copy of the register, the claim contract, the details of default, and a copy of the distribution schedule |
Application for Stay of Execution
Because a lawsuit of objection to distribution does not affect execution until the judgment becomes final, it is advisable to apply for a stay of execution at the same time as filing the lawsuit.
If you do not apply, the distribution proceeds may be paid out as they are, and recovery afterward may become difficult.
The application for a stay of execution, the document of provision of security, the guarantee insurance policy, and the like must be submitted together, and in some cases the court may order the provision of security.
Points to Note During the Course of the Lawsuit
In accordance with the procedure of the Civil Procedure Act, the trial proceeds through receipt of the defendant's answer, designation of the date for oral argument, examination of evidence, and the like.
You must strictly observe the deadlines for submitting evidence and specifically prove the legal grounds and factual relationships for all of your assertions.
You must also be sure to comply with the court's requests for submission of documents.
Judgment and Subsequent Procedures
On a lawsuit of objection to distribution, the court renders a judgment such as maintaining the existing distribution schedule, modifying it, declaring it void, or ordering the preparation of a new distribution schedule.
When the judgment becomes final, the execution court accordingly prepares a new distribution schedule or proceeds with redistribution procedures.
See More
5. Lawsuit of Objection to Distribution | Issues
A lawsuit of objection to distribution is not a procedure that ends with a mere objection.
A substantive dispute over the distribution schedule becomes a valid assertion only when a thorough review of the factual relationships, analysis of legal rights, observance of deadlines, and lawful procedures all come together.
In particular, the priority of distribution, whether a security right is valid, the timing of a demand for distribution, and the like are areas where the interpretation of the Civil Execution Act and the Civil Procedure Act is combined, and a considerable legal burden may fall on an ordinary person responding alone.
In many cases the objection itself was lawful, but the case was rejected because the scope of the objection or the counterparty was incorrectly specified, or the right was lost because the lawsuit filing procedure was missed.
Drawing on its experience handling numerous auction and distribution procedures and lawsuits of objection to distribution, this firm provides accurate and prompt assistance across the full range of practice, including ▲reviewing the distribution schedule and determining whether to object ▲representing clients in responding on the date ▲analyzing the priority of distribution and organizing evidence ▲filing the lawsuit, including a stay of execution, and representing clients in subsequent procedures.
To address legal blind spots, this firm also operates branch offices in each region nationwide and runs a 365-day, 24-hour urgent consultation system and a non-face-to-face video consultation service.
Please book a legal consultation with a Daeryun civil law specialist attorney by whichever method is convenient for you.
