Compare a collection agency, a direct lawsuit, and an agency-first hybrid strategy using expected recovery, timing, fees, litigation costs, VAT, and the time value of money.
The starting values are an illustrative KRW 55 million claim, not official fees or market recovery averages. Probability must include cash collection, while recovery percentage is the amount collected if successful.
Normalize claim value, time value, VAT, and procedure checks across all three strategies.
Amount separately confirmed as claimable through the comparison date
Your opportunity cost of delayed recovery
VAT basis for professional fees
Court, search, and enforcement expenses are not taxed again.
Limitation review
Enter an authorized agency quote and your conditional recovery assumptions.
Whole months from 1 to 120
Model cash recovery rather than judgment alone, with court, lawyer, search, and enforcement costs.
Conservative share of the legal reference amount actually collected
Only agency failures move to the separate lawyer and court stage.
Termination, file return, and new-counsel handover
Highest expected NPV under current inputs
KRW 27,972 above second place
The numerical leader is not a legal-service recommendation. Evidence, title, debtor assets, contract scope, and sensitivity can change the decision.
Expected net present value
KRW 14,470,539
Expected cost as a share of gross recovery 24.68%
Expected net present value
KRW 25,969,185
Expected cost as a share of gross recovery 27.35%
Expected net present value
KRW 25,997,157
Expected cost as a share of gross recovery 27.49%
Each threshold holds other inputs fixed and solves for zero expected NPV. The sequential hybrid does not have one comparable single-stage threshold.
This first-instance reference applies Civil Procedure Act Articles 98 and 109 and the attorney-fee inclusion schedule. It is not a cost order or collection result.
The same percentage-point change is applied to every stage probability. Check whether uncertainty changes the NPV leader.
| Probability change | Agency NPV | Lawsuit NPV | Hybrid NPV | Leader |
|---|---|---|---|---|
| -20%p | KRW 7,803,633 | KRW 17,030,847 | KRW 17,271,622 | Agency then lawsuit |
| -10%p | KRW 11,137,086 | KRW 21,500,016 | KRW 22,072,710 | Agency then lawsuit |
| 0%p | KRW 14,470,539 | KRW 25,969,185 | KRW 25,997,157 | Agency then lawsuit |
| +10%p | KRW 17,803,992 | KRW 30,438,355 | KRW 29,044,964 | Lawsuit and enforcement |
| +20%p | KRW 21,137,445 | KRW 34,907,524 | KRW 31,216,131 | Lawsuit and enforcement |
These probability-weighted comparison flows are not invoice, judgment, or distribution dates.
| Strategy | Month | Flow | Expected amount |
|---|---|---|---|
| Agency only | 0 mo. | Start cost | KRW -530,000 |
| Agency only | 6 mo. | Expected agency recovery inflow | KRW 15,444,000 |
| Lawsuit and enforcement | 0 mo. | Start cost | KRW -5,315,000 |
| Lawsuit and enforcement | 14 mo. | Expected final recovery inflow | KRW 33,484,850 |
| Agency then lawsuit | 0 mo. | Start cost | KRW -530,000 |
| Agency then lawsuit | 4 mo. | Agency outcome and lawsuit transition | KRW 5,148,500 |
| Agency then lawsuit | 18 mo. | Expected final recovery inflow | KRW 23,439,395 |
Korean rules current in 2026 · primary sources verified 2026-08-03
A creditor comparing an unpaid invoice or loan often starts with the collection agency’s contingency rate and the lawyer’s quote. That comparison misses two variables that can dominate the result: the chance of collecting cash and the time required to receive it. A low fee does not create value if recovery is unlikely or delayed, and a favorable judgment does not become cash when the debtor has no reachable assets.
This Korea-based calculator compares three paths: an authorized debt collection company alone, a civil lawsuit followed by enforcement, and an agency-first sequence in which only failed files move to the lawyer and court stage. It reports probability-weighted gross recovery, expected costs, nominal net recovery, and expected net present value in KRW.
Success probability and recovery percentage are deliberately separate. Probability means the chance that cash is actually collected during the stated period, not merely the chance of winning a judgment. Conditional recovery percentage means the share of the claim collected if that path succeeds. Multiplying them produces expected gross recovery; fees, court expenses, enforcement outlays, and the time value of money then produce expected net recovery.
| Strategy | Cost structure | Timing structure | Critical checks |
|---|---|---|---|
| Agency only | Upfront professional fee and cash expenses, plus a fee if money is recovered | One probability-weighted recovery at the agency horizon | Authorization, eligible claim, definition of success |
| Lawsuit and enforcement | Filing, service, lawyer retainer, search, success fee, and enforcement outlay | Recovery and possible cost reimbursement after litigation and enforcement | Evidence, collectible assets, recoverable costs |
| Agency then lawsuit | Agency cost for every file, then litigation and handover cost only for agency failures | Recovery during the first stage or a later conditional court stage | Termination, tail fee, exclusivity, file return |
This path can be modeled when voluntary payment remains plausible, the claim is eligible for delegation, and the written quote defines both success and its fee base. It does not assume that the agency can guarantee assets, payment, or a particular recovery rate.
A legally supportable claim can still face a separate collection problem after judgment. Property inquiry, garnishment, collection orders, or auction may be required, so the model includes enforcement timing and cost instead of stopping at a win rate.
Files collected during the agency-first window avoid the later lawsuit budget. Failed files incur a separate handover and court stage. A post-termination success-fee clause or minimum delegation term must be added to the actual inputs rather than ignored.
Evidence, debtor location and assets, secured and senior creditors, rehabilitation or bankruptcy, and the extent of a genuine dispute can change recovery dramatically. A vendor’s advertised rate is not automatically applicable to your file. A litigation win rate is also not a cash-recovery probability and can materially overstate expected proceeds.
Let total claim value be principal plus verified accrued interest and costs. The VAT multiplier is 1.10 only when the fee quote is a supply price and the VAT option is enabled. Court, search, and enforcement cash expenses are entered as actual amounts and are not taxed again. The discount factor for month m is one plus the annual discount rate, raised to m divided by twelve.
Conditional gross recovery equals total claim multiplied by the recovery percentage. The VAT-inclusive success fee equals that amount multiplied by the contract rate and VAT multiplier. Expected nominal net recovery is probability multiplied by conditional recovery net of success fee, minus the upfront fee and fixed cash expense. NPV discounts the probability-weighted terminal inflow before subtracting today’s fixed cost.
Start cost includes filing, service, confirmed other litigation cost, VAT-inclusive retainer, and property search. The successful terminal branch adds gross claim recovery and the entered share of recoverable-cost reference, then subtracts the VAT-inclusive success fee and enforcement outlay. Probability is applied to that terminal branch; start cost is paid regardless.
The agency start cost occurs today. An agency success produces a net collection at the agency-first month. An agency failure produces the lawsuit start and handover outflow at that same month. Only the probability of agency failure multiplied by later lawsuit success receives the final lawsuit branch at the combined month. The conditional expected duration weights those two successful endpoints.
The zero-NPV success probability holds all other inputs fixed and solves for the minimum probability at which expected NPV reaches zero. The maximum success-fee rate holds the current probability and conditional recovery fixed and solves for the supply-price percentage at which expected NPV reaches zero. These are economic thresholds, not lawful, customary, or recommended fee rates.
The hybrid has two probabilities and two recovery percentages, so the interface does not compress it into one misleading threshold. The five-row probability sensitivity table is the more transparent test for the sequential option.
The default example uses KRW 50,000,000 principal, KRW 5,000,000 of verified accrued interest and costs, a 6% annual discount rate, and 10% VAT on professional-fee supply prices. These are illustrative inputs, not Korean market averages.
The agency-only path assumes a 45% cash-recovery probability, 80% conditional recovery, a 20% success fee, and six months. The lawsuit path assumes a 70% cash-recovery probability, 90% conditional recovery, and fourteen months. The hybrid gives the agency four months, a 30% chance to recover 70%, and sends only the remaining 70% of files to a lawsuit with a 70% conditional success probability.
| Measure | Agency | Lawsuit | Hybrid |
|---|---|---|---|
| Expected gross recovery | KRW 19,800,000 | KRW 34,650,000 | KRW 35,805,000 |
| Expected nominal net recovery | KRW 14,914,000 | KRW 28,169,850 | KRW 28,057,895 |
| Expected NPV | KRW 14,470,539 | KRW 25,969,185 | KRW 25,997,157 |
| Zero-NPV success probability | About 1.5899% | About 11.8926% | Sequential model |
The hybrid exceeds the lawsuit NPV by only about KRW 27,972. That difference is tiny relative to a KRW 55 million claim. A small change in agency-stage probability, litigation delay, handover cost, or a post-termination fee can reverse the order. Treat the two paths as economically close under the example.
Overall success is 30% in the agency stage plus 70% of files reaching litigation multiplied by 70% later success, for 79%. The successful-branch expected timing is about 12.6835 months. This arithmetic does not prove that the two real-world stages are independent or that a failed agency file retains the same lawsuit quality.
Civil Procedure Act Article 98 states the basic rule that litigation costs are borne by the losing party. Article 109 limits attorney fees treated as litigation costs to the amount allowed under Supreme Court rules. A creditor therefore should not enter the full engagement fee as guaranteed reimbursement.
Under Article 3 of the Rules on Inclusion of Attorney Fees in Litigation Costs, the includable amount is limited both by the amount paid or payable and by a schedule based on the value in dispute for each instance. The current schedule, effective December 28, 2020, begins with KRW 300,000 through a KRW 3 million dispute value and applies progressively lower marginal percentages as value rises.
| Dispute-value band | Included amount or marginal rate |
|---|---|
| Up to KRW 3 million | KRW 300,000 |
| Over KRW 3 million through KRW 20 million | KRW 300,000 + 10% of excess |
| Over KRW 20 million through KRW 50 million | KRW 2 million + 8% of excess |
| Over KRW 50 million through KRW 100 million | KRW 4.4 million + 6% of excess |
| Over KRW 100 million through KRW 150 million | KRW 7.4 million + 4% of excess |
| Over KRW 150 million through KRW 200 million | KRW 9.4 million + 2% of excess |
| Over KRW 200 million through KRW 500 million | KRW 10.4 million + 1% of excess |
| Over KRW 500 million | KRW 13.4 million + 0.5% of excess |
At a KRW 55 million dispute value, the first-instance schedule cap is KRW 4,700,000. In the default scenario, VAT-inclusive lawyer fees paid or payable are higher, so the reference recognized amount remains KRW 4,700,000. Filing of KRW 250,000, service of KRW 165,000, confirmed other litigation cost of KRW 300,000, property search of KRW 200,000, and enforcement of KRW 500,000 produce a maximum cost reference of KRW 6,115,000. Applying the user-entered 70% collection assumption gives KRW 4,280,500 if the recovery branch succeeds.
It is a litigation-cost inclusion reference for allocation after a case. It is not a statutory market price, recommended engagement fee, or guarantee that the debtor will pay. Partial success, opponent-cost offset, additional instances, court discretion, tax treatment, and collectible assets can change the result. Use the separate litigation-cost determination calculator for a detailed cost-order model.
Civil Execution Act Article 53 states that costs necessary for compulsory execution are borne by the debtor and receive priority reimbursement from that execution. The legal allocation rule does not create assets. If the execution produces too little cash, the creditor may not receive the full expense despite having the legal right to claim it.
The calculator therefore keeps a separate cost-recovery percentage. It is a user-confirmed conservative share of the displayed legal reference, combining cost allocation uncertainty and practical collectability. Update it after a judgment allocation, a cost-amount determination, an asset search, or an expected distribution becomes more reliable.
Credit Information Use and Protection Act Article 2, subparagraph 10, defines debt collection business as exercising an eligible collection claim for a creditor through property investigation, payment demand, or receipt of payment under delegation. Subparagraph 10-2 defines a debt collection company as a person authorized by the Financial Services Commission. Article 4 requires authorization, and Article 2, subparagraph 11, limits the claims that can be delegated to such a company.
A business name or advertisement containing the words debt collection does not itself prove authorization or claim eligibility. Confirm the exact contracting entity, its authorization, the type of claim, the records transferred, and the lawful scope before providing debtor information or paying an upfront fee.
Fair Debt Collection Practices Act Article 8-4 prohibits a debt collector who is not an attorney from conducting litigation in connection with collection. The hybrid model consequently moves from an agency stage to a separate lawyer, self-representation, and court stage. It never treats the collection company as litigation counsel.
Article 9 prohibits violence, threats, detention, deceptive force, unjustified repeated or nighttime visits and communications that seriously disturb private or business life, false debt statements to third parties, and other specified conduct. The calculator does not turn unlawful pressure into a higher recovery assumption.
Value-Added Tax Act Article 11 treats the provision of services as a supply of services, and Article 30 sets the VAT rate at 10%. When the VAT option is enabled, the calculator adds 10% only to entered agency and lawyer professional-fee supply prices. It does not add VAT again to court, property-search, enforcement, or other cash expenses entered as actual amounts.
If both quotes already include VAT, turn the option off and enter both on the same gross basis. Do not compare one tax-exclusive agency quote against one tax-inclusive lawyer quote. The tool does not calculate input-tax credits, deductible business expenses, bad-debt treatment, corporate tax, or personal income-tax effects.
Civil Act Article 686 addresses remuneration under mandate when there is a special agreement and related timing rules. It does not establish a universal collection-agency or lawyer success-fee percentage. Every rate in the interface is an editable contract input, never a statutory or market-standard claim.
The table applies minus 20, minus 10, zero, plus 10, and plus 20 percentage points to every stage success probability, capped between zero and 100%. It then recalculates all three NPVs and identifies the numerical leader in each row. This is a fixed stress test, not a statistical probability distribution.
A stable ranking means the selected probability range does not reverse the NPV order. It does not validate the underlying legal or factual assumptions. Costs, duration, recovery percentage, and contract tail fees still need separate stress tests.
If a ten-point move changes the leader, the decision is highly assumption-sensitive. Obtain more evidence about assets, prior payment behavior, defenses, or comparable file outcomes before treating the numerical leader as meaningful.
Examine the agency-first duration, limitation risk, handover friction, loss of time, duplicate fee clauses, and whether failed agency files are systematically harder to litigate. Those facts can matter more than a small modeled NPV difference.
This model uses no universal statutory rate. Civil Act Article 686 recognizes remuneration tied to a special agreement in a mandate relationship but does not establish one percentage for all debt collection engagements. Enter the written quote, VAT basis, success definition, and fee base.
No. Civil Procedure Act Article 109 and the Supreme Court rule schedule limit the amount recognized as litigation costs. Partial success, opponent-cost offset, multiple instances, court discretion, and actual debtor assets can reduce the amount paid in cash. Use a conservative cost-recovery percentage.
A final payment order can be an enforcement title. A new merits action on the same claim may be unnecessary, while property inquiry and enforcement may be the relevant next steps. The tool does not make that legal determination, so replace unnecessary filing, service, and retainer inputs with the actual enforcement budget after review.
The calculator does not assume that a delegation or demand alone creates a particular limitation effect. Due date, acknowledgment, partial payment, court filing, and other facts need case-specific review before selecting a long agency-first period.
Fair Debt Collection Practices Act Article 8-4 prohibits litigation conduct by a debt collector who is not an attorney. Keep collection-company work separate from counsel, self-representation, and court enforcement, and confirm each party’s written scope and fee.
Fixed costs are paid even if recovery fails. A low probability, small conditional recovery, high success fee, or long delay can make probability-weighted discounted inflow smaller than those fixed costs. A negative result does not prove the claim should be abandoned; it signals that the current economic assumptions need legal and factual review.
The National Law Information Center OPEN API was checked on August 3, 2026 for current-history status, identifiers, effective dates, and article text. Recheck the calculation, tests, and both language guides if authorization scope, lawful-collection rules, litigation cost allocation, the attorney-fee schedule, execution-cost rules, mandate remuneration, or VAT changes.
Enter the agency quote, lawsuit and enforcement budget, and transition terms, then rerun low, base, and high cash-recovery scenarios.
When the NPVs are close, treat limitation, enforcement title, evidence, debtor assets, authorization, and contract clauses as the next questions rather than treating the model as a final legal answer.