국문 KR 영문 EN

Why Crypto Loans Become Problematic in Rehabilitation and Bankruptcy Proceedings

Crypto loans differ fundamentally from conventional personal loans or private lending, as the form of collateral and transaction pathways are often unclear or non-standard.
 

In rehabilitation and bankruptcy practice, crypto loans typically fall into the following categories:
 

• Exchange-linked crypto loan products

• Private, peer-to-peer loans secured by crypto assets

• Loans provided through overseas crypto platforms

Many debtors mistakenly assume that crypto-related debts do not need to be disclosed, or that overseas transactions fall outside Korean legal procedures.
 

This assumption is highly risky.
 

Once a debt is omitted, it may later be excluded from discharge and continue to survive.

Moreover, if the integrity of the procedure is compromised, courts are more likely to dismiss the case or deny discharge.
 

From the moment a debtor makes unilateral judgments, the case can begin to move in an unfavorable direction.
 

How Crypto Loans Are Treated in Rehabilitation and Bankruptcy

Whether a crypto loan is recognized as a valid debt depends on the legal structure of the loan and the flow of funds.
 

Where crypto assets were provided as collateral, courts must assess whether the collateral arrangement can be legally recognized as a secured claim under the Debtor Rehabilitation and Bankruptcy Act (such as a rehabilitation secured claim or a separately satisfied claim).
 

If the collateral structure is not legally valid, the debt is treated as a general rehabilitation claim or bankruptcy claim.
 

In addition, the timing and method used to assess the market value of crypto assets are critical in determining the debtor’s asset pool.
 

Price volatility and whether the crypto collateral has already been liquidated directly affect the feasibility of a rehabilitation repayment plan.
 

In bankruptcy cases, further issues may arise, including:
 

• Whether repayments or collateral provided to specific creditors prior to filing are subject to avoidance actions under Articles 391–407 of the Debtor Rehabilitation and Bankruptcy Act

• Procedural complications in claim verification and distribution involving overseas creditors

In practice, many debtors become worse off not because of the amount of debt itself, but because the handling of crypto loans is legally flawed.
 

Key Issues That Must Be Addressed When You Have Crypto Loans

The reason crypto loan transactions and borrowing relationships must never be concealed is straightforward.
 

Courts determine whether to approve a rehabilitation plan or grant a discharge based on the accuracy and completeness of the debtor’s asset and creditor disclosures (Articles 147, 148, and 564(1)(3) of the Debtor Rehabilitation and Bankruptcy Act).
 

Accordingly, full and accurate disclosure of all assets and liabilities is mandatory.
 

When properly organized documentation is submitted, proceedings tend to progress in a stable and predictable manner.
 

Conversely, if the initial approach is incorrect, corrective orders are repeatedly issued, the risk of dismissal increases, and both time and costs escalate unnecessarily.
 

At this stage, the debtor’s response strategy—and whether professional guidance is involved—often determines the outcome.
 

For many individuals losing sleep over crypto loan issues, proper legal handling is the first step toward regaining stability.
 

How Decent Law Firm Handles Rehabilitation and Bankruptcy Cases Involving Crypto Loans

Decent Law Firm approaches crypto loan cases by first restructuring the underlying transaction framework to align with court standards.
 

We develop tailored response strategies based on loan type—exchange-linked products, overseas platforms, or private lending—and adjust for crypto holdings, liquidation timing, and market volatility so these factors do not negatively affect the procedure.
 

Our assistance goes far beyond administrative filing.
 

We provide strategy-driven legal handling designed to proactively prevent dismissal or denial of discharge.
 

Rather than concluding that “crypto loans make rehabilitation impossible,” we focus on how crypto loans must be handled to make rehabilitation or bankruptcy legally viable.
 

If crypto-related debts and assets are not accurately identified and properly addressed, they can materially undermine plan approval or discharge decisions.
 

For this reason, a structured and professional response from the earliest stage is essential.
 

Having crypto loans does not make rehabilitation or bankruptcy impossible.
 

However, improper handling can make it impossible.
 

You do not need to carry that risk alone—Decent Law Firm provides the legal strategy and response needed to navigate crypto loan issues effectively.