ABSTRACT
A Study on the Setoff under the Insolvency Law
Kim, Dong Hyeon
Major in Civil Law
Graduate School of
Seoul National University
The Insolvency System is prepared to mitigate the negative effect from the condition that
debtors reach the insolvency situation in which generally he can hardly complete to pay his debt.
The Insolvency Law System of our country is composed of the Bankruptcy Law, the Composition Law,
and the Corporate Reorganization Law and the purposes that the laws chase are different from one
another. The bankruptcy process is ruled by the ideology of "equitable repayment", for it
retains the matter that the legal relationship on the debtors'' assets is wholly made terminated
and the assets are made converted into money and allotted to the creditors. However the
composition process and the corporate reorganization process are rather ruled by the ideology of
"rehabilitation of the debtors". Those different ideologies will play the roles of indicator
when the provisions on the setoff in each process are construed and applied.
However the setoff provided by the Civil Code defined that the persons who stand bilaterally in
the same kind of debt mutually indicate their intention that they simultaneously liquidate
their own debt and the other''s that in the same amount. The setoff is generally evaluated as to
function securities, and the security function is maximized at the situation of the bankruptcy.
Therefore, if such setoff are exercised without any restriction, not only that will injure
equitable repayment among the creditors but also will have a bad influence on rehabilitation of
the debtor, for common securities will be in short by the money not being paid that should be
paid actually. Therefore the Bankruptcy law, the Composition law, and the Corporate
Reorganization law set up the several restrictions in order to keep the setoff from being abused.
And in some aspect those laws specially allow to extend that setoff. The extention of the setoff,
however, is in discord with the ideologies of insolvency law, "equitable repayment" and
"rehabilitation of the debtors". That extention is desired to be abolished and now existing
provisions of those extentions are advised to be restrictly construed.
The Bankruptcy law is the basis of the bankruptcy law system and provide the most basic matters
on the regulations of the setoff. The Composition law provides the correspondent application of
the provisions on the regulations on the setoff of the Bankruptcy law. Both laws, however, are
different from each other in the main ideologies and it is not desirable that the Composition
law applies the provisions on the setoff of the Bankruptcy law. The Corporate Reorganization law
regulate the setoff more restrict than the Bankruptcy law or the Composition law. Because it is
strongly dominated by the ideology of rehabilitation of the debtors.
In the future that the unified insolvency law is established, above provisions on the setoff are
to be arranged.
keywords: bankruptcy, setoff, composition, corporate reorganization
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