The first separation to make before a Korean corporate bankruptcy
A company shortfall is not automatically a debt of its representative director, shareholder or family.
A Korean stock company is a separate debtor, and Commercial Act Article 331 generally limits a shareholder’s responsibility to the subscription price of the shares.
Yet a signed personal guarantee, an amount that the owner owes back to the company, a valid secondary tax or social-insurance assessment, or a separately established personal claim may remain outside the company proceeding.
The planning problem is therefore not simply how much the company owes, but which amounts have a documented legal path to the individual and when cash might be needed.
This calculator keeps the company shortfall, confirmed owner exposure and conditional upper exposure in separate columns.
It does not turn every unpaid company invoice into personal debt, and it does not erase an owner obligation merely because the company is considering insolvency.
What decision this calculator supports
Company-side shortfall
Compare company liabilities with a conservative net distributable asset estimate without assigning that gap to the owner.
Net guarantee exposure
Reduce a documented guarantee only by recognized prior payments and recoveries on that same guaranteed debt.
Confirmed versus conditional
Keep assessed, adjudicated or otherwise supported personal amounts apart from unresolved stress estimates.
Household liquidity buffer
Combine personal exposure with a one-to-24-month household cash gap and compare it with personal liquidity.
The output is designed for a pre-consultation meeting with Korean insolvency counsel, an accountant, a labor specialist or the relevant authority.
It is a document-based stress test, not a prediction of a court distribution, a tax assessment, criminal liability, veil piercing, director liability, bankruptcy eligibility or discharge.
Use a separate run for each person who signed a guarantee because marriage or family status alone does not make one person’s signed obligation the other person’s debt.
The five layers of the model
1. Company liabilities and net distributable assets
Start with ordinary company debt such as bank loans, trade payables and rent.
Add unpaid wages, unpaid statutory retirement benefits, company tax arrears and company social-insurance arrears as separate categories so that labor and public claims remain visible.
Net distributable company assets should be a conservative realization estimate after security interests, sale expenses, collection risk and distressed-sale discounts, not merely a book value or purchase price.
The calculator subtracts that asset estimate from total company liabilities and floors the result at zero.
2. Labor claims and substitute wage payments
Unpaid wages and unpaid retirement benefits form the labor-claim total used by this model.
If an expected substitute wage payment has been estimated separately or confirmed with the authority, the calculator caps that input at the labor-claim total.
It then shows the amount still payable directly to workers and the expected subrogated government claim.
It deliberately does not subtract the substitute payment from total company liabilities because Wage Claim Guarantee Act Article 8 transfers the worker’s claim to the government to the extent paid.
3. A documented personal guarantee
Enter only a balance supported by the owner’s signed or sealed guarantee document and a current creditor statement.
The model recognizes an amount already paid by the owner first, then the expected company distribution to that guaranteed creditor, and finally collateral recovery on the same obligation.
Each offset is capped at the remaining guaranteed balance, which prevents an excessive recovery estimate from creating a negative exposure.
The order also makes the audit trail readable even though the final arithmetic would be the same when all offsets are valid and relate to the same claim.
4. Owner accounts and separately supported liabilities
A director advance or another receivable recorded by the company against the owner can be an asset of the company estate rather than an ordinary outside debt.
The calculator subtracts only a setoff amount that has been confirmed through legal and accounting review.
It then adds confirmed secondary tax liability, confirmed secondary social-insurance liability, confirmed wage-related personal liability and other confirmed personal liability.
Unresolved amounts stay in four conditional fields and appear only in the upper scenario, never disguised as confirmed debt.
5. Household cash runway
Monthly essential living costs and monthly personal debt service are compared with monthly household income after tax.
Only a negative monthly balance becomes the household gap, so a household with positive monthly cash flow has a zero living-cost buffer in this model.
The gap is multiplied by the selected planning period, which defaults to 12 months and can range from one to 24 months.
Confirmed and upper cash-plan targets are then compared with readily available personal liquidity, excluding company money and assets that cannot be reliably realized.
Formula map
Corporate bankruptcy owner exposure formula map| Output | Calculation | Important boundary |
|---|
| Company shortfall | Total company liabilities minus net distributable company assets, floored at zero | Not automatically personal debt |
| Direct worker amount | Labor claims minus effective substitute wage payment | Company labor total remains unchanged because of subrogation |
| Net guarantee exposure | Guarantee minus recognized prior payment, company distribution and same-debt collateral recovery | Use one creditor and one guaranteed debt at a time |
| Net owner-account repayment | Company receivable from owner minus documented permissible setoff | Do not set off ledger labels without legal and accounting support |
| Confirmed personal exposure | Net guarantee plus net owner-account repayment plus confirmed statutory and other liabilities | Confirmed means supported, not merely feared |
| Upper personal exposure | Confirmed personal exposure plus conditional additional exposure | Conditional amounts remain a stress scenario |
| Monthly household gap | Essential costs plus personal debt service minus after-tax income, floored at zero | Company expenses and assets stay outside the household line |
| Upper liquidity gap | Upper exposure plus living-cost buffer minus personal liquidity, floored at zero | A planning target, not a legal due date |
Step-by-step workflow
- Choose a single valuation date.
Obtain creditor balances, payroll records, tax notices, social-insurance notices and owner-account ledgers as of that date.
Mixing a current bank balance with an old payroll figure can make both the company shortfall and personal scenario misleading.
- Build the company column before the owner column.
List company creditors without deciding prematurely whether the owner is personally responsible.
A guaranteed bank loan still belongs in company liabilities while the personally guaranteed balance is also analyzed separately in the owner section.
- Estimate assets on a net realization basis.
Reduce inventory, receivables, equipment and property for security rights, collection risk, sale costs and distressed-sale discounts.
If a trustee, court-appointed examiner or adviser has prepared a realization schedule, use that documented estimate instead of an optimistic book value.
- Match every guarantee offset to the same debt.
Record what the owner already paid and what that creditor is expected to recover from the company or collateral.
Do not use the total expected distribution to all creditors as the recovery on one guaranteed loan.
- Separate notices from unresolved risks.
Put an assessed or otherwise specifically supported amount in a confirmed field.
Put a conservative adviser-reviewed upper amount in a conditional field when shareholder-control, employer status, director conduct or another issue remains open.
- Create the household runway independently.
Use personal after-tax income, essential living costs, personal loan payments and liquid personal funds.
Exclude company bank balances and avoid counting the same household cash in separate runs for the owner and spouse.
- Print and annotate the result.
Write the supporting document, date and reviewer next to every material figure.
During advice, move an amount from conditional to confirmed only when the legal and factual basis has actually been resolved.
Worked example: why KRW 550 million is not the owner result
Assume ordinary company debt of KRW 600,000,000, unpaid wages of KRW 30,000,000, unpaid retirement benefits of KRW 20,000,000, company tax arrears of KRW 40,000,000 and social-insurance arrears of KRW 10,000,000.
Total company liabilities are KRW 700,000,000.
With net distributable company assets of KRW 150,000,000, the company shortfall is KRW 550,000,000 and asset coverage is about 21.4 percent.
That KRW 550,000,000 remains in the company column rather than being copied into the owner column.
Labor claims total KRW 50,000,000.
An expected substitute wage payment of KRW 25,000,000 produces a direct worker amount of KRW 25,000,000 and an expected government subrogated claim of KRW 25,000,000.
Total company liabilities still remain KRW 700,000,000 because the identity of the claimant changes to the extent of statutory subrogation.
Worked owner exposure and household cash example| Step | Amount | How it was obtained |
|---|
| Net guarantee exposure | KRW 110,000,000 | KRW 200,000,000 less KRW 10,000,000 paid, KRW 30,000,000 company recovery and KRW 50,000,000 collateral recovery |
| Net owner-account repayment | KRW 30,000,000 | KRW 40,000,000 company receivable less KRW 10,000,000 documented setoff |
| Confirmed statutory and other liability | KRW 28,000,000 | KRW 20,000,000 tax, KRW 5,000,000 social insurance and KRW 3,000,000 other confirmed liability |
| Confirmed personal exposure | KRW 168,000,000 | Net guarantee, net owner account and confirmed statutory or other liability |
| Conditional additional exposure | KRW 67,000,000 | Unresolved tax, social-insurance, wage-related and other upper estimates |
| Upper personal exposure | KRW 235,000,000 | Confirmed exposure plus conditional additional exposure |
| 12-month living-cost buffer | KRW 24,000,000 | KRW 2,000,000 monthly gap multiplied by 12 months |
| Confirmed cash-plan target | KRW 192,000,000 | Confirmed exposure plus living-cost buffer |
| Upper cash-plan target | KRW 259,000,000 | Upper exposure plus living-cost buffer |
| Upper liquidity gap | KRW 209,000,000 | Upper target less KRW 50,000,000 available personal liquidity |
The consultation starts with KRW 168,000,000 of confirmed personal exposure, not the KRW 550,000,000 company shortfall.
It also preserves KRW 67,000,000 as a separate conditional stress amount so unresolved issues are neither hidden nor misrepresented as final debt.
Legal framework checked on August 29, 2026
The model was checked against the current Korean statutes through the official National Law Information Center on August 29, 2026.
The identifiers below preserve the law ID and master text sequence, or MST, used during verification so a later update can be compared with the same source trail.
An overall law may have a newer effective date than one cited article; the calculator records the current master text while the requirements document identifies article-specific dates where relevant.
Official Korean legal sources and model boundaries| Official source | Verified text | Articles | How this model uses it |
|---|
| Commercial Act | Law ID 001702 · MST 272919 | Articles 331 and 401 | Separate shareholder limited liability from fact-specific director liability |
| Civil Act | Law ID 001706 · MST 284415 | Articles 428 and 428-2 | Require a documented guarantee balance rather than an assumed oral amount |
| Debtor Rehabilitation and Bankruptcy Act | Law ID 009930 · MST 267359 | Articles 250 and 473 | Keep guarantor rights separate and flag labor or public claims for review without deciding distribution rank |
| Labor Standards Act | Law ID 001872 · MST 283457 | Articles 2, 36, 43, 109 and 115 | Preserve company wage arrears while refusing to auto-determine personal civil or criminal exposure |
| Wage Claim Guarantee Act | Law ID 000128 · MST 283451 | Articles 7 and 8 | Separate direct worker arrears from the government subrogated claim |
| Employee Retirement Benefit Security Act | Law ID 009883 · MST 284455 | Article 9 | Keep unpaid retirement benefits visible as a separate labor input |
| Framework Act on National Taxes | Law ID 001586 · MST 288571 | Article 39 | Accept assessed or adviser-reviewed secondary liability instead of deciding controlling-shareholder status |
| Framework Act on Local Taxes | Law ID 011177 · MST 283257 | Article 46 | Apply the same confirmed-versus-conditional boundary to local tax |
| National Health Insurance Act | Law ID 001971 · MST 276651 | Article 77-2 | Keep possible secondary contribution liability in a notice-based field |
| National Pension Act | Law ID 001781 · MST 280269 | Article 90-2 | Keep possible secondary contribution liability in a notice-based field |
| Employment and Industrial Accident Insurance Premium Collection Act | Law ID 009589 · MST 247481 | Article 22-5 | Keep possible secondary contribution liability in a notice-based field |
How the legal boundaries change the inputs
Shareholder status does not produce a one-line personal-debt formula
Commercial Act Article 331 supplies the starting rule for shareholder limited liability.
Commercial Act Article 401 separately addresses a director who, through wilful misconduct or gross negligence in performing duties, causes damage to a third party.
Whether those elements exist requires facts, evidence and legal analysis, so the calculator never multiplies the company shortfall by ownership percentage and labels the result director liability.
A judgment, settlement or case-specific opinion can instead be entered as confirmed wage-related or other personal liability, while an unresolved adviser estimate belongs in a conditional field.
The guarantee survives as its own document question
Civil Act Article 428 describes the guarantor’s obligation when the principal debtor fails to perform.
Article 428-2 requires the guarantee intention to be expressed in a writing bearing the guarantor’s signature or seal and applies the form rule to an adverse amendment.
Debtor Rehabilitation and Bankruptcy Act Article 250 provides that a rehabilitation plan does not affect creditor rights against a guarantor, a jointly liable person or third-party collateral.
Those rules are why the input asks for a documented guarantee balance and same-debt recoveries instead of assuming that the company proceeding removes or fixes the guarantee.
Labor arrears remain visible even when a substitute payment is expected
Labor Standards Act Article 36 generally requires payment of money and valuables within 14 days after death or retirement unless an extension is agreed in the statutory manner.
Article 43 governs direct, full and regular wage payment, while Articles 109 and 115 contain penalty and dual-liability provisions.
Those provisions do not justify a calculator declaring every company wage arrear to be a personal civil debt of the representative director.
Wage Claim Guarantee Act Article 8 also means that a substitute payment changes the claimant for the paid portion through subrogation, which is why the company labor total stays intact.
Secondary public liabilities need the actual status and notice
Framework Act on National Taxes Article 39 and Framework Act on Local Taxes Article 46 address secondary liability when corporate property is insufficient, including specified unlimited partners or controlling shareholders.
The analysis can involve a related-person group, control, actual exercise of rights, the degree of company insufficiency and a proportional cap.
Similar secondary-contribution structures appear in National Health Insurance Act Article 77-2, National Pension Act Article 90-2 and Premium Collection Act Article 22-5.
The calculator therefore asks for the amount on an actual notice or a conservative amount reviewed by an adviser; it does not ask only for an ownership percentage and invent an assessment.
Evidence hierarchy for each amount
Good inputs have both a number and a traceable document date.
A rough memory of what a lender or officer said may be useful for an initial note, but it should not be presented as a confirmed figure.
The following hierarchy helps decide whether an amount belongs in the confirmed column, the conditional column or nowhere in the model yet.
Evidence hierarchy for corporate bankruptcy owner exposure inputs| Input group | Preferred evidence | Treatment when uncertain |
|---|
| Company liabilities | Creditor schedule, balance confirmation, invoices, payroll and official arrears records | Keep disputed company claims identified but do not move them to personal exposure |
| Net distributable assets | Appraisal, collateral schedule, collection analysis and adviser realization schedule | Use a conservative range and rerun rather than relying on book value |
| Personal guarantee | Signed or sealed guarantee, amendment, current balance and demand | Do not treat an oral recollection as a confirmed guarantee balance |
| Company or collateral recovery | Creditor-specific distribution estimate and security realization support | Use zero or a conservative amount until the recovery relates to the same debt |
| Owner-account repayment | General ledger, bank trail, underlying transaction and account reconciliation | Do not assume an account label proves the legal obligation |
| Setoff | Mutual-claim analysis, maturity check and written legal or accounting review | Leave at zero until the setoff has been specifically supported |
| Secondary tax or contribution | Official assessment or payment notice and its calculation schedule | Use an adviser-reviewed conditional upper amount while status is disputed |
| Wage-related personal liability | Judgment, mediation, settlement or fact-specific written legal view | Keep company arrears in the company column and personal exposure conditional |
| Household liquidity | Current personal statements and a realistic monthly household budget | Exclude company funds and hard-to-sell assets |
Useful planning scenarios
A lender guarantee must be checked before filing
A policy-backed or institution-backed company loan can still involve separate agreements, recourse terms or guarantee limitations.
Enter each creditor’s documented guaranteed balance and matching collateral recovery rather than assuming that the product name determines the owner outcome.
Print separate calculations when different people signed different documents.
Workers are leaving while a substitute payment is being prepared
Reconcile payroll and retirement-benefit schedules before estimating any substitute payment.
The result will show the direct worker remainder and the expected subrogated claim without reducing the company labor total.
Eligibility, statutory periods and payment caps must still be checked through the dedicated wage-guarantee workflow and the competent authority.
A controlling-shareholder assessment is possible but not issued
Do not put ownership percentage multiplied by total tax arrears in the confirmed field.
Ask counsel or the tax adviser to examine related persons, control, exercise of rights, company insufficiency and the statutory proportional limit.
Put the resulting conservative review amount in the conditional field until an assessment or other reliable basis confirms it.
An owner advance and shareholder loan appear on opposite sides of the ledger
Similar labels do not establish that setoff is legally available.
Trace the underlying transfers, parties, maturity and restrictions, then enter only the amount specifically cleared for setoff.
The calculator caps the setoff at the company receivable but cannot validate the legal prerequisites itself.
The owner and spouse both signed documents
Run the tool once for each signatory so the creditor, guarantee scope and personal assets remain attributable to the correct person.
When producing a combined household plan, remove duplicated personal liquidity and shared living expenses before adding the two results.
Marriage alone is not a reason to merge every liability into one person’s legal exposure.
Sensitivity checks worth running
One output is not a forecast because distributions, collateral realization, assessments and household income may change.
Save or print a base case, then change one assumption at a time so the reason for the difference remains clear.
- Set expected company distribution and collateral recovery to zero for a conservative guarantee case
- Use a lower net distributable asset estimate to reveal company-side insolvency sensitivity without changing personal exposure automatically
- Move a disputed assessment between zero and the adviser-reviewed conditional upper amount
- Compare six, 12, 18 and 24 months when household income may be interrupted
- Remove personal liquidity that is pledged, jointly disputed or not readily realizable
- Run separate owner and spouse worksheets, then reconcile shared household cash only once
The spread between the confirmed and upper scenarios identifies where evidence work has the greatest cash-planning value.
If one conditional tax or wage issue drives most of the spread, resolving that issue may be more useful than refining minor company asset assumptions.
Common errors that materially distort the result
- Copying the whole company shortfall into confirmed personal exposure
- Subtracting an expected substitute wage payment from total company liabilities despite statutory subrogation
- Using total company distributions as recovery on one guaranteed creditor’s claim
- Counting collateral recovery twice in both net company assets and the guarantee offset without reconciling the same asset
- Assuming a director advance and shareholder loan are automatically eligible for setoff
- Calculating secondary tax or insurance liability from ownership percentage alone
- Treating all company wage arrears as an adjudicated personal civil debt of the representative director
- Combining a spouse’s guarantee with the owner’s guarantee without checking who signed which instrument
- Including company cash as personal liquidity or counting the same household account in two separate worksheets
- Reading the cash-plan target as a statutory due date or a court-approved repayment schedule
Concealment, sham claims, nominee transfers or preferential payments are not planning solutions.
Pre-insolvency transfers and setoffs may create avoidance, denial or criminal issues, so obtain case-specific advice before moving assets or preferring a creditor.
Documents to put behind the printed worksheet
- A creditor-by-creditor company debt schedule with one valuation date and current balance statements
- Every original guarantee, amendment, cap, term and demand for each owner, spouse or shareholder
- A security schedule, appraisal, expected realization statement and distribution assumptions linked to each creditor
- Payroll ledgers, employment records, retirement-benefit calculations and substitute-payment application records
- National tax, local tax, health insurance, pension and employment or industrial-accident premium notices
- Owner advance and shareholder loan ledgers, bank trails, underlying agreements and a written setoff review
- Personal after-tax income evidence, essential household budget, personal loan schedule and liquid account statements
- A one-page issue list identifying who supplied each conditional figure and what evidence would resolve it
Mark every figure with its source and date instead of bringing only the calculator total.
That practice lets the adviser replace assumptions without losing the company-personal separation that makes the worksheet useful.
Frequently asked questions
Does a Korean corporate bankruptcy cancel the owner guarantee?
Do not assume that it does. A guarantee is a separate obligation supported by its own document, and Debtor Rehabilitation and Bankruptcy Act Article 250 preserves creditor rights against guarantors in the rehabilitation context. Review the signed guarantee, current balance, demand, company recovery and collateral.
Why can the company shortfall be much larger than personal exposure?
The company and owner are different debtors. Only an obligation with a personal basis, such as a documented guarantee, owner-account repayment, assessment, judgment or settlement, enters the personal calculation.
Does a substitute wage payment eliminate the company wage debt?
It can reduce what remains directly payable to the worker, but Wage Claim Guarantee Act Article 8 subrogates the government to the worker claim to the extent paid. The model therefore preserves total company labor claims and separates the claimant portions.
Is every unpaid wage a personal civil debt of the representative director?
No automatic conclusion is made here. Company payment duties, employer status, penalty provisions and a personal civil claim involve different legal questions. Enter personal exposure only when a judgment, settlement or specific review supports an amount.
Can I calculate secondary tax liability from share percentage?
Not reliably with share percentage alone. The statutory inquiry can require related-person grouping, control, actual exercise of rights, company insufficiency and a proportional limitation. Use the official notice or an adviser-reviewed conditional amount.
Can an owner advance be automatically set off against a shareholder loan?
No. The underlying claims, parties, maturity and legal restrictions require review. Enter only an amount that legal and accounting advisers have specifically confirmed as available for setoff.
Should the conditional upper scenario be treated as debt now?
No. It is a liquidity stress scenario for unresolved issues. Change it to zero when the issue is excluded, or move it into the confirmed field when a notice, judgment, settlement or reliable opinion establishes the amount.
Should the owner and spouse use one combined guarantee figure?
Use a separate worksheet for each signatory. You may later prepare a household cash plan, but shared liquidity and living costs must not be counted twice.
What does a zero monthly household gap mean?
It means entered after-tax income is at least the sum of entered essential living costs and personal debt service. It does not mean the household has enough liquidity to cover confirmed or conditional personal exposure.
Can I submit this result as a court distribution schedule?
No. It is a user-input planning worksheet, not a financial statement, claim allowance, court distribution table, tax assessment or legal opinion. Use it to organize the supporting records for professional review.
Official sources and update boundary
Source checking was completed on August 29, 2026 through Korea’s official National Law Information Center.
The calculation constants retain the official law IDs and MST values shown above for update traceability.
Because statutes, administrative practice, assessments and individual documents can change, confirm the current text and your own notices before acting.
Turn the stress range into a document checklist
Print the result and keep company debt, personal guarantees, labor claims, public-liability notices, owner accounts and household cash in separate evidence bundles.
Review each source and valuation date with Korean insolvency counsel, an accountant and a labor specialist so confirmed and conditional figures can become an actual response schedule.
This calculator is an informational planning aid and does not replace legal, tax, labor or accounting advice, an official assessment or a court decision.