The government plans to drastically ease debt-related rules under the Civil Code to sharply reduce the burden on guarantors.
There have been many cases in which borrowers defaulted, leaving the guarantors, including some not adequately informed of the loan particulars, holding the debt. This has led to suicides.
The changes would be the first major overhaul of debt rules since the code was established in 1896, sources said Monday.
In an interim report on the planned rule changes, the Civil Code division of the Legislative Council, which advises the justice minister, will call for drastic reforms of the private debt guarantee system, the sources said.
Under current rules, people named as guarantors of debts must accept responsibility if the original debtors fail to meet their obligations. Thus, many people who served as guarantors, mainly cosigners, have gone bankrupt and in some cases have committed suicide after being saddled with massive debt burdens.
The Legislative Council division will propose allowing courts to reduce or eliminate the obligations of guarantors flexibly by taking into account their ability to repay the liabilities of the original debtors and other factors, the sources said. It may also allow the cancellations of the debt guarantee contracts if the creditors fail to give guarantors sufficient explanations about the details of contracts, including the amount of liabilities borne by the original debtors.