Bankruptcies filed by 20-somethings rising

The number of bankruptcy requests filed by those aged between 20 and 29 has been continuing to rise over the past few years, driven by unpaid student loans and living expenses, data showed Sunday.

This is an indication that the financially vulnerable whose borrowing choices are limited to high-interest rate, low-tier lenders are taking the hardest hit of the economic slowdown.

According to data submitted to Rep. Kim Byung-wook of the ruling Democratic Party of Korea (DPK) from the Supreme Court, the number was 691 in 2015, a 17 percent increase from 811 in 2018.

Already 411 such requests have been filed in the first half of 2019.

This is in stark contrast to the rest of the age groups, whose requests for bankruptcy have been on a continued decline between a rate of 4.2 percent and 28.4 percent over the past year.

The plight shared by those in their 20s contrasts with their older counterparts, most of whom are able to borrow at a lower rate following key base rate cuts from the central bank.

While the Bank of Korea (BOK) is expected to further cut key base rates amid lingering domestic and external uncertainties, the subsequent borrowing rate cut from the commercial banks are available only to those with an already good credit score, long managed via continued lending and paying back the principal and interest.

“The key base rate cut essentially has no bearing on those in their 20s,” Sung Tae-yoon, an economist at Yonsei University, said.

“They are unable to manage their credit as most of them have minimum-wage, temporary jobs, with no job security, which does little to improve their credit scores,” he added.

His assessment is in line with the Supreme Court data which showed over a quarter, or 26 percent, of people categorized as “unqualified borrowers,” are those in their 20s.

They are defined as those who have no history of credit card use over the past two years, and no borrowing history for three years.

Sung added that their situation will worsen, given the businesses will remain reluctant to push for new hires in the near term.

“Under the current economic slowdown, those fresh out of universities will find it more difficult to land new jobs, meaning more of them will see their credit fall in the coming months,” he added.